The Magnificent Seven has turned into the Stupendous One as AI spending fears weigh on sentiment.
The usually reliably hot Magnificent Seven trade of Meta (META), Amazon (AMZN), Google (GOOG), Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA) has underwhelmed more than one month into 2025. Only one of the big-cap tech components — Meta — has notched double-digit gains out of the box.
In fact, shares of Meta have risen for 15 straight sessions through Monday — bringing its year-to-date advance to a stellar (or stupendous…) 20%.
Amazon is the only other Mag Seven component to be up on the year to the tune of 5.9%, slightly ahead of the 3.4% increase for the S&P 500 (^GSPC). Alphabet, Apple, Nvidia, Microsoft, and Tesla are all down year to date, with an average drop of 3% based on Yahoo Finance’s calculations.
Tesla is the worst performer on the year, down 6% as it has been hit with less-than-inspiring sales news from across the world. Tariff concerns have also weighed on the stock, similar to other auto plays like General Motors (GM) and Ford (F).
Digging deeper, six out of seven Mag Seven members have reported fourth quarter earnings so far: All but Meta are down since their reports. Alphabet is down the most at 10.4%, as the Street reacted very negatively to its initial 2025 outlook.
“Price reactions suggest growing concerns around monetization vs. capex for hyperscalers,” said BofA strategist Savita Subramanian in a client note on Monday.
To Subramanian’s point, the capital expenditure numbers being tossed for 2025 by Big Tech to build out AI infrastructure have been eye-popping — and have caught investors off guard. Collectively, they have the Street worried about whether profit margins for the Mag Seven hit a short-term peak in 2024.
Meta, Microsoft, Amazon, and Alphabet are slated to spend a cumulative $325 billion in capital expenditures and investments this year, Yahoo Finance’s Laura Bratton reports. This would mark a 46% increase year over year for the four tech stalwarts.
Amazon alone sees $104 billion in capital expenditures this year, well above prior analyst forecasts of $80 billion to $85 billion.
RBC Capital Markets analyst Brad Erickson warned last week Mag Seven names such as Amazon are “crowded” trades and that the “AI ‘spend money to make money’ debate will undoubtedly continue.”
The question now beginning to circulate on the Street is if Mag Seven weakness bleeds into the broader market. If so, it could have an outsized impact on stocks not directly tied to tech.
