4 reasons why Mag-7 underperformed in June

Investing.com -- Deutsche Bank said the Magnificent Seven tech stocks have acted as a drag on U.S. markets over the past nine to ten months, a trend that accelerated sharply in June despite continued global enthusiasm for artificial intelligence.

Strategist Jim Reid noted that the underperformance "isn't entirely new," pointing to a rotation out of the stocks that began in late October of last year.

Reid said the market narrative through the first half of 2026 had been dominated by the conflict in Iran and widespread global "AI fever," making the tech giants' lagging performance "counterintuitive."

Deutsche Bank cited four factors behind the June underperformance. First, positioning in large-cap tech was "extreme" at the end of May, according to the bank's equity strategy team, before returning to a more neutral stance.

Second, the bank pointed to growing apprehension regarding capital expenditure spending by the largest hyperscalers.

Third, Deutsche Bank said the Federal Reserve's more hawkish pivot "may have negatively impacted growth-oriented stocks."

Fourth, the bank flagged surging costs for memory and storage chips, which are raising concerns about profit margins across parts of the tech sector, even as the trend benefits chipmakers.

Deutsche Bank highlighted this with Apple's recent price increases across a broad range of its products, a development its Research Institute had anticipated in a piece on memory demand published weeks earlier.

Reid stated that market leadership has shifted away from the Mag-7 for now, even as AI-related enthusiasm continues globally, citing the KOSPI index's gain of more than 100% year-to-date.

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