AI Spending Weighs on Tech Giants, With Only Meta Notching Double-Digit Gains
The "Magnificent Seven" tech stocks (Meta, Amazon, Google, Apple, Nvidia, Microsoft, and Tesla) have underperformed in 2025, with Meta being the sole exception posting double-digit gains. Concerns over AI spending have dampened sentiment, leading to an average decline of 3% among the group.
Meta's 20% year-to-date surge is attributed to 15 consecutive sessions of gains. Amazon is the only other Mag Seven component up, albeit modestly at 5.9%, outpacing the S&P 500's 3.4% rise.
Tesla has been the worst performer, down 6% due to disappointing sales news and tariff uncertainties. Six of the seven Mag Seven members have reported Q4 earnings, with all but Meta down since their reports.
Alphabet has suffered the most, dropping 10.4% on concerns over monetization and capital expenditures (capex). Big Tech's AI infrastructure investments are estimated to reach $325 billion this year, a 46% increase over 2024.
Analysts warn that excessive spending could erode profit margins, potentially capping upside potential for the Mag Seven. The group's combined weighting in the S&P 500 has soared to over 30%, raising concerns that weakness in these stocks could ripple through the broader market.
Nvidia's upcoming earnings report on February 26 will be a key test for the Mag Seven's resilience.