Macro Memo
July 28, 2026
The economy is not what is breaking right now; it is holding up. What is breaking is the most crowded trade on the planet, and it is breaking for three reasons at once: China has made AI models cheap, China is becoming a real threat in memory and semiconductor equipment, and a lot of investors in Asia bought into all of it with borrowed money. Everything else in this note follows from those three facts.
The Selloff
The Philadelphia Semiconductor Index more than doubled over the past year before falling 21% from its June 22 record high by Monday’s close. Monday marked the third straight down session. SMH lost more than 2% on the day, AMD fell 5%, Teradyne dropped 4%, and Sandisk sank 11% amid renewed concerns around memory. Intel fell nearly 8% on Friday despite beating revenue estimates, while Broadcom, AMD, and Micron went down with it.
When a company beats and the stock still falls, the news is not what is moving the price.
Money is rotating, not leaving the market. ServiceNow jumped on Monday as software clawed back some of its losses from earlier this year, while Apple passed Nvidia to become the largest company in the market. Managers have been trimming semis and moving into hyperscalers, software, financials, and healthcare.