It’s time to bury the “Magnificent Seven” label for the cohort of tech stocks that have led the markets over the last few years.
Quick insight: Thank you to Citi strategist Scott Chronert for calling a spade a spade: The Magnificent Seven — consisting of Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) — has lost its luster.
The AI revolution is creating new winners with outsized earnings and influence on markets. That, in turn, has led to weakness in the Magnificent Seven, as well as a hunt for the next market-defining basket of stocks.
“Our view is that Mag 7 vs Other 493 is misleading terminology at this stage in the AI playbook. This grouping leads one to believe that the Other 493 is powering the index gains and earnings growth while the strength mostly comes from a handful of ~mega-ish caps outside of the Mag 7 that are outsized beneficiaries of the AI infrastructure buildout,” Chronert wrote in a new note.
He suggested broadening the cohort to further capture the AI theme, adding Broadcom (AVGO), Micron (MU), and AMD (AMD) to the Seven. This new grouping, he wrote, has outperformed where the Seven dragged, and its earnings contribution “is over half of the full index consensus growth for 2026.”
Even this breakout, he noted, “would miss significant earnings contributors such as Intel, Applied Materials, Cisco, and Lam Research.”
What’s behind the move: All Magnificent Seven stocks have underperformed the S&P 500 (^GSPC) in 2026 except for Alphabet, which has notched a 11% year-to-date gain versus the benchmark index’s 8.3% advance.
Wall Street is growing increasingly impatient with Big Tech’s astronomical capital expenditures on artificial intelligence, projected to balloon 70% and exceed $700 billion this year.
This aggressive spending on data centers and high-end GPUs has heavily cannibalized corporate cash generation. The Magnificent Seven’s collective 12-month forward free cash flow is expected to drop sharply from its 2024 peak.
“There is growing apprehension regarding the capex spend by the largest hyperscalers,” Deutsche Bank strategist Jim Reid warned in a note.
The bottom line: The Magnificent Seven has expired as a useful seven stocks to follow religiously. The data proves it, and so does common sense.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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