VGT Drops 5% in a Week: Are Hyperscaler Capex Cuts Looming?

The Vanguard Information Technology ETF (VGT) gave back a chunk of its 2026 gains, sliding 5% in a single week as semiconductor names corrected. The fund is still up about 21% year to date and roughly 39% over the past year, but the pullback has raised questions about the sustainability of the tech rally.

Possible Causes

The sell-off was triggered by a correction in semiconductor stocks, which had led the broader tech rally. Additionally, growing uncertainty around hyperscaler capital expenditure (capex) guidance for the second half of 2026 is weighing on sentiment. Companies like Microsoft, Amazon, and Google are major buyers of AI chips, and any slowdown in their spending could impact chipmakers like NVIDIA (NVDA), Broadcom (AVGO), and Oracle (ORCL).

Broader Context

Despite the weekly drop, VGT remains up 21% year-to-date and 39% over the past year. The correction comes after a strong run, and some analysts view it as a healthy pullback. However, the focus is now on hyperscaler earnings reports in H2 2026, which will provide crucial capex guidance.

Similar Moves in the Sector

Other tech ETFs, such as the Semiconductor ETF (SMH), also experienced declines. Stocks of AI-related companies like Microsoft (MSFT) and Salesforce (CRM) edged lower in sympathy with the sector correction.

What This Means for Investors

The current pullback may present a buying opportunity, but risks remain tied to hyperscaler capex guidance. Investors should closely monitor upcoming earnings from major cloud providers, as their spending plans will likely dictate the sector's trajectory in the coming months.