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WALL STREET WONDERS IF SPACEX IS PULLING CASH FROM THE AI TRADE

Wall Street's biggest technology stocks may be paying the price for SpaceX's historic market debut, as speculation grows that investors might be freeing up cash for the new entrant by trimming some of the most liquid winners of the AI trade.

Elon Musk's rocket and AI company SPCX.O is set for a Nasdaq listing on Friday, reportedly targeting a valuation of roughly $1.75 trillion and looking to raise $75 billion -- easily the biggest in terms of deal size in Wall Street's history.

Reuters reported earlier this week that the deal's oversubscription rate is running at 3-1/2 to 4 times the planned offering size, showcasing insatiable demand for the company's shares.

The "Magnificent Seven" -- which is a shorthand used to describe some of the biggest tech names on Wall Street, namely Nvidia NVDA.O, Apple AAPL.O, Amazon.com AMZN.O, Alphabet GOOGL.O, Meta META.O, Tesla TSLA.O, and Microsoft MSFT.O -- may be paying the price for it.

"If capital needs to be reallocated, the Magnificent Seven are the most likely source of funds. Their liquidity, scale, and outsized index weightings make them the path of least resistance, and therefore the most likely to absorb any broad-based selling or rotation," Jefferies analysts said in a June 5 note.

The Magnificent Seven, along with Broadcom AVGO.O, provide ample liquidity to the market, with a combined trading volume of $133 billion per day on average, as per Jefferies estimates.

Stephanie Link, chief investment strategist at Hightower Advisors, said the selling could extend well beyond the mega-cap names to semiconductor companies, which had a tremendous run-up recently.

"Portfolio managers are not paid to hold cash so you're going to have to sell something, and this is not just for SpaceX though. It's also Anthropic and OpenAI that are coming," she said.

The pressure may already be showing. Last week, the Magnificent Seven combined lost more than $1.1 trillion and have shed around $1.2 trillion so far this week as a tech selloff accelerated.

The Philadelphia chips index .SOX, which has rallied over 76% so far this year but has come under pressure lately, shed over $1 trillion on June 5 alone.

(Shashwat Chauhan)

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EARLIER ON LIVE MARKETS:

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TECH BARGAIN HUNTING LIFTS FUTURES DESPITE MIXED PPI REPORT CLICK HERE

EUROPE AT HALF-TIME: COUNTDOWN TO ECB'S 'INSURANCE HIKE' CLICK HERE

A RECORD WEEK FOR VOLATILITY IN SEOUL CLICK HERE

FRIDAY'S TECH SELLOFF VS TUESDAY'S CLICK HERE

POSITIVE START CLICK HERE

EUROPE BEFORE THE BELL: NOT YOUR EVERYDAY CEASEFIRE CLICK HERE

TECH AND WAR JITTERS SAP CONFIDENCE CLICK HERE

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