It’s been a tough year so far for the “Magnificent Seven” tech stocks.
Those seven tech behemoths wildly outperformed most other stocks over the past three-plus years and pushed stock indexes like the S&P 500 and the Nasdaq Composite significantly higher — to new records. Those seven stocks began to attract significant capital after OpenAI released the original ChatGPT in late 2022, beginning the investor mania surrounding artificial intelligence (AI).
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But in recent months, investors have grown nervous about allocating more capital to the overcrowded AI trade, which has been the essential appeal of the seven stocks for several years. As a result, the Magnificent Seven stocks are down about 4.9% this year, as measured by the Roundhill Magnificent Seven ETF (NYSEMKT: MAGS). In fact, that ETF peaked back in late October 2025, so they’ve been drifting downward for about four months.
Meanwhile, the other 493 stocks in the S&P 500, which some market observers have taken to calling the “Impressive 493,” are enjoying a relatively good 2026. As measured by the Defiance Large Cap ex-Mag 7 ETF (NASDAQ: XMAG), which offers exposure to the S&P 500 excluding the Magnificent Seven, they’re up 2.9% this year.
For comparison to both sets of stocks, the broader S&P 500 index is up about 1.7% this year, while the tech-heavy Nasdaq Composite is basically flat.
Market analyst Edward Yardeni, who coined the term “Impressive 493,” says there’s a clear rotation taking place, from the Magnificent Seven to the rest of the market. Back in December, Yardeni ended his buy call for tech stocks, arguing that the market was too concentrated among a handful of stocks, i.e., the Magnificent Seven. Yardeni said that for the Magnificent Seven to continue to thrive, a wide swath of other companies would have to use their products and services, which would confer benefits of AI on them, too.
As a result of the rotation, 2026 is seeing other sectors thrive while big tech stagnates or moves lower. Energy, industrials, basic materials, and consumer defensive stocks are all having a great year, as are many healthcare stocks. Even residential construction and home improvement stocks are up significantly for the year on a suddenly brighter outlook for the housing sector.
