The "Magnificent Seven" tech stocks, once the engine behind the US stock market's record-breaking rallies, are gradually diverging. As investors grow more cautious about the artificial intelligence spending boom, this portfolio of mega-cap stocks has shown significant performance disparities over the past year.
Data from The Wall Street Journal indicates that in 2025, only Alphabet and Nvidia have outperformed the S&P 500 index, while the other five giants—Microsoft, Meta, Apple, Amazon, and Tesla—have lagged behind the broader market. Fund managers point out that this group can no longer be considered synonymous with market leadership. David Bahnsen, Chief Investment Officer at Bahnsen Group, stated:
"Their correlation has broken down. The only thing they have in common now is the 'trillion-dollar market cap' label."
This shift marks a new phase in the AI-driven trading logic that has fueled the current bull market, with investors beginning to deploy capital more selectively. Some funds anticipate that AI benefits will spread to sectors like healthcare, while others are focusing on chip manufacturers or energy companies, reflecting a market pivot from the broad AI theme towards specific niches and tangible profitability.
The AI arms race is intensifying internal divisions within the "Magnificent Seven." Amazon, Alphabet, Microsoft, and Meta have clearly positioned themselves as "hyperscale cloud providers," committing hundreds of billions of dollars to train new AI models, build data centers, and expand cloud computing infrastructure. Nvidia continues to dominate the high-end AI chip market, supplying the core computing power for the most advanced AI models.
Meanwhile, other members are falling behind. Apple's stock underperformed the S&P 500 last year, with the iPhone maker facing market criticism for its relatively cautious investments and slower progress in the AI space compared to rivals. Tesla, once a major market darling, has seen its stock performance lag behind most of its "Magnificent Seven" peers as electric vehicle sales growth has slowed.
Michael Arone, Chief Investment Strategist at State Street Global Advisors, noted:
"They are at different stages of development. The rising tide used to lift all boats, but now we are going to see clear winners and losers."
Individual investors, who were once steadfast holders of the "Magnificent Seven," are gradually shifting their attention to other areas of the market. Data from Vanda Research shows that last year, retail trading as a percentage of the total volume in these seven stocks was significantly lower than levels seen in 2023 and 2024.
Taking Tesla, a long-time favorite among retail investors, as an example, the decline in retail trading activity is particularly evident. In 2025, the average daily retail trading volume for the stock fell by approximately 43% compared to its peak two years prior. Despite this divergence, these seven companies still wield outsized influence over the market. According to Dow Jones Market Data, they collectively account for about 36% of the S&P 500's total market capitalization, and their movements will continue to impact the overall market's performance.
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