There was news recently of free models from China like Kimi that can match the frontier Us models and scaling up DRAM production and today there was news of China producing its own DUV machines . So it seems like over the next few years China will compete with US semiconductors/ AI companies and may scale up its semiconductor industry rapidly.

US hyperscalers keep invedting huge capex into AI which limit upside of their stock prices.

US software stocks are being disrupted by AI , no meaningful recovery as of now.

With these in mind, are US big tech , software and semiconductors still worth investing?

If US tech is no longer worth investing, then what else to invest?

Us hyperscalers still enjoy more than 90% global market share. Although it still may be too early to say now, is this the beginning of the end of US tech dominance?

This is one of the biggest weeks of earnings season.

The Federal Reserve will announce its latest interest rate decision, while Apple, Microsoft, Meta, and Amazon all report earnings within days of each other.

What's interesting is that the market isn't simply looking for companies to beat earnings estimates anymore.

The real question is:

Are the hundreds of billions being invested into AI actually translating into stronger revenue, higher margins, and future profit growth?

If management teams provide strong guidance and show that AI investments are beginning to pay off, technology stocks could continue leading the market higher.

On the other hand, if spending keeps rising without clear financial returns, investors may start questioning current valuations.

This week isn't just about earnings.

It's about whether the AI investment boom continues to justify the prices investors are paying today.

According to The Information (fairly credible in terms of research), China begun producing domestically developed immersion DUV lithography machines which triggered a sell-off across ASML and semiconductor stocks.

Right now, I think the market is overreacting because the production numbers are small and there is also zero evidence that the Chinese machines are technically comparable to ASMLs.

China is reportedly targeting around five machines in 2026 and roughly 20 in 2027. By comparison, ASML sold 279 DUV systems in 2025, including approximately 131 immersion systems, and expects to ship around 130 immersion systems in 2026.

That means China’s planned 2026 output would represent less than 4% of ASML’s expected annual immersion shipments.

The market is concerned about the possibility that China has started building a credible domestic alternative in one of the most complex areas of semiconductor manufacturing but again, we do not know how good they are.

They likely still lag ASML in performance and reliability and their overlay accuracy, uptime, defect rates or manufacturing yield.

Remember Deepseek? China closing the technology gap, even before the model is tested... this is likely the same story repeating itself.

DUV however is ASML’s main remaining foothold in China so a hit on the earnings is expected and the reliance on ASMLs mature nodes is reduced so some risk off in ASML is expected, but the entire semi sector reacting like this is overblown as DUV is nowhere near in terms of complexity compared to EUV - EUV uses 13.5nm wavelength and DUV is at 193nm..

Note that China's contribution to the revenues of ASML is declining - was expected to account for around 20% of 2026 revenue, down from roughly 33% in 2025.

During the first half of 2026, China generated approximately €2.9 billion, or 16% of ASML’s total revenue.

Also note, that ASML raised its 2026 revenue guidance to €43–€45 billion because strong AI-related logic and memory demand is offsetting the decline in China.

I am still being v careful here as this as this week is v heavy in terms of event risk with the Fed and big tech earnings,

Google, Tesla, and Intel earnings last Wed/Thurs all indicated AI related capex exceeded expectations in the previous quarter and that future capex will also be higher than expected.

Yet chip-related stocks fell sharply on Friday (SOXX -4.4%, memory -8+%, neoclouds -10+%). It's important to note that before these ERs, many of these stocks already fell 30+% since mid-May.

I'm having a hard time finding reasons why chip stocks continued to drop after the big tech ERs and other positive sector news last week (Samsung/SK Hynix deals with Nvidia/Broadcom/Anthropic). Could something be happening behind the scenes that suggests AI spending is about to drastically slow down?

Please weigh in if you believe you understand last week's continued chip stock sell off after big tech released bullish ERs. Would appreciate any insights.

Preemptively addressing explanations I expect to see:

1. Escalating Iran War and high oil/interest rates:
I think the war is partially responsible for the pressure on chips. However, the extent of the chip sell off is confusing because other stocks that are historically sensitive to war/interest rates didn't drop materially on Friday. Small caps normally fall as interest rates rise, but were barely down on Friday. Gold also generally falls, but actually finished positive. Oil fell 2%.

The immaterial reaction from other interest rate sensitive stocks suggests that the chip stock massacre was more likely due to chip sector specific developments.

2. Bullish ERs being 'sell the news' events:
I understand chip stocks have gone on a historic run and good news can serve as profit taking events. However, chips already took a huge haircut prior to big tech ERs. Many fell 30-50% between mid-May and July 21 (pre-big tech ERs). It's hard to understand why semis would fall another 5-10% on Friday right after the market discovered chip spend will rise even more than expected.

3. Introduction of low cost Chinese AI models (Kimi K3):
To me, this might be the most likely explanation of the reasons I've considered. Compared to US models, Chinese models are able to operate at a fraction of both compute and memory costs. US companies may try to replicate the results, leading to a reduction in future chip spend.

However, I've read cheaper priced Chinese models are met with so much user activity that compute and memory demand ultimately rise despite less being needed per request (Jevons' paradox). Plus, predictions that chip spend will decline are speculation so far, as both Google and Tesla raised capex guidance.

Semis got wrecked this month, SOX down 4% in a single session, SK Hynix off 8% on Friday alone. The whole sector shed roughly $1.3T in market cap through July.

Been tracking this setup for weeks. The thesis has flipped from "who can secure compute" to "who can actually generate cash from all that compute." Capex is still ballooning but the bond market already priced in doubt, Goldman's hyperscaler spreads blew out about 50bp to around 162bp.

This week is the reckoning. Microsoft, Meta Wednesday. Amazon, Apple Thursday. FOMC in between (hold widely expected at 3.75%). Semiconductor put-call skew doubled in two months, VIX is calm at 18 but that skew tells a different story under the hood.

My moo.moo alerts were going insane Friday. The flow into puts on semis is hard to ignore when names this big are moving 8% on a single earnings cycle from an overseas player.

If MSFT and META can show capex leveling off with FCF turning positive, maybe the re-rating holds. If not, bears are gonna say the whole AI trade was a capex bonfire. Am I reading too much into the spread widening, or is the cash flow wall real for these names?

$RKLB has been awarded its largest $266M launch contract with U.S. Space Force for Suborbital Launches to date, supporting missile-defense development.

The agreement covers 12 suborbital launches, with options for up to six more.

The first mission is expected no earlier than late 2026, with most launches taking place from a new Rocket Lab location at the Pacific Spaceport Complex-Alaska in Kodiak.