AI Spending Worries Dampen 'Magnificent Seven' Tech Stocks
The once-reliable "Magnificent Seven" tech stocks (Meta, Amazon, Google, Apple, Nvidia, Microsoft, Tesla) have underperformed in 2025 due to concerns over AI spending.
Only Meta has posted double-digit gains this year, while the remaining members have declined. Amazon is marginally ahead of the S&P 500, while Alphabet, Apple, Nvidia, Microsoft, and Tesla are all down year-to-date.
Tesla is the worst performer with a 6% decline, facing headwinds from sales and tariff concerns. Four out of seven Mag Seven companies have reported earnings, all but Meta declining post-results.
BofA strategist Savita Subramanian highlights investor concerns over monetization versus capital expenditure (capex) for tech giants. Big Tech's heavy AI infrastructure investments have raised worries about future profit margins.
Meta, Microsoft, Amazon, and Alphabet plan to spend a combined $325 billion on capex this year, a 46% increase year-over-year. Amazon's $104 billion capex is significantly higher than analysts' estimates.
RBC's Brad Erickson cautions that Mag Seven stocks are "crowded" and the AI spending debate will continue.
The decline in Mag Seven stocks raises concerns about its impact on the broader market, given their significant weighting within the S&P 500.
22V Research strategist Jeff Jacobson predicts a near-term test for Mag Seven bulls with Nvidia's earnings release on Feb. 26.