AI Spending Concerns Weigh on Tech Giants
The recent market sentiment has seen the once-reliable "Magnificent Seven" tech stocks underperform. Meta (META), Amazon (AMZN), Google (GOOG), Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA) have all struggled more than a month into 2025.
Meta is the sole exception, with a remarkable 20% year-to-date gain. However, other Mag Seven components have fallen, with an average decline of 3%.
Tesla is the worst performer, down 6% due to disappointing sales news and tariff concerns. Six of the seven Mag Seven members have reported fourth quarter earnings, with all but Meta showing declines since their reports.
Investors are concerned about the impact of AI infrastructure investments on profit margins. Big Tech companies are planning to spend a combined $325 billion on capital expenditures in 2025, marking a 46% increase year-over-year.
Analysts warn that the weakness in the Mag Seven could have broader market implications. The concentration of these stocks within the S&P 500 is at an all-time high.
Experts see Nvidia's upcoming earnings on Feb. 26 as a key test for the Mag Seven bulls.