The "Magnificent Seven" stocks once drove the U.S. market, but now they are diverging.
The “Magnificent Seven” tech stocks that once propelled the US stock market to record highs are gradually diverging. As investors become more cautious about the AI spending boom, this portfolio of ultra-large-cap stocks has shown significant performance differences in the past year.
According to The Wall Street Journal, 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 all lagged behind the broad market. Fund managers point out that this group is no longer synonymous with market leadership. David Bahnsen, Chief Investment Officer of Bahnsen Group, states:
“Their correlation has collapsed. Now the only thing they have in common is the trillion-dollar market cap label.”
This shift marks a new phase in the logic of AI trading since the start of the current bull market, with investors becoming more selective in their strategies. Some capital expects the AI dividend to spread to industries like healthcare, while others focus on chip manufacturers or energy companies, reflecting the market's shift from the AI theme to specialized sectors and real profitability.
AI Arms Race Intensifies Internal Divergence
The AI spending boom is creating structural differentiation within the “Magnificent Seven.” Amazon, Alphabet, Microsoft, and Meta have clearly transformed into “ultra large-scale cloud service providers,” investing hundreds of billions of dollars in training new AI models, building data centers, and expanding cloud computing infrastructure. Nvidia continues to dominate the high-end AI chip market, providing the core computing power for the most advanced AI models.
Meanwhile, other members have fallen behind. Apple's stock underperformed the S&P 500 Index last year, with the iPhone maker criticized for its cautious approach and slower progress in AI investments compared to competitors. Tesla, once a market darling, has significantly lagged behind most of the “Magnificent Seven” as electric vehicle sales growth slows.
Michael Arone, Chief Investment Strategist at State Street Global Advisors, points out:
“They are at different stages of development. In the past, a rising tide lifted all boats, but now we will see clear winners and losers.”
Retail Investors Shift Their Attention
Retail investors, who long held firm positions in the “Magnificent Seven,” are gradually turning their attention to other sectors of the market. Vanda Research data shows that retail trading in these seven stocks last year was significantly lower than levels in 2023 and 2024.
Taking Tesla as an example—a long-time favorite among retail investors—its trading activity among retail traders has declined markedly. In 2025, the stock's average daily retail trading volume fell about 43% from its peak two years ago. Despite this divergence, the seven companies still wield enormous 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, so their movements will continue to have a major impact on the overall market performance.
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