Good morning. Is the ‘Magnificent Seven’ losing its glory? Since the final quarter of 2025, the famous cluster of Big Tech stocks has languished. Alphabet’s gains are helping to keep the Mag 7 in positive territory, whereas chip company Nvidia, the biggest gainer in the group over the past few years, has faltered.
The Mag 7 is still the key driver of the S&P 500’s earnings growth. But as the AI story unfolds, investors have become more discerning about potential winners and losers. The new fear, that AI adoption will make software companies obsolete, has hit Microsoft especially hard. And as big tech companies’ AI investments balloon, scrutiny is increasing over the returns on all the spending. Microsoft, Amazon, and even Alphabet’s shares sold off recently after they announced big increases to investment budgets. Meta, which reported banner revenue growth at the same time, got a warmer welcome from markets.
Seema Shah at Principal Asset Management said: “The investment case for tech is no longer as straightforward. The AI cycle appears to be entering a more mature phase: shifting from an environment that rewarded almost all tech exposures to one where AI advancement more clearly differentiates adaptive, resilient models from those that are easily automated.”
Jim Reid at Deutsche Bank warned that if more of the Mag 7 are caught off guard in the disruption, the spillover may have profound implications for the macroeconomy. Can the US economy, and the stock market, thrive without the Mag 7? Send us your thoughts: unhedged@ft.com.
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