The tech giants that propelled Wall Street to record highs over the past two years are now facing a slowdown. “The stock market has lost its leadership,” said Jim Paulsen, an independent market strategist, as investors shift away from the so-called “Magnificent Seven”—Apple, Microsoft, Alphabet, Amazon, Tesla, Nvidia, and Meta.
The Rise and Stumble of the Magnificent Seven
Between 2023 and 2024, the Magnificent Seven surged more than 160%, driving the S&P 500 higher. But in 2025, that momentum has faded. “A Bloomberg index tracking the Magnificent Seven has added just 1 per cent this year, with losses for Tesla, Microsoft and Alphabet offset by a 25.8 per cent rally for Meta.” The S&P 500 has eked out just a 4% gain this year, and the tech giants have struggled to contribute.
“The subdued performance this year has come as investors, such as hedge funds, have rotated away from the Magnificent Seven,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. The shift highlights growing concerns about elevated valuations and the massive costs associated with AI infrastructure.
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Investors Shift to Other Sectors
Big Tech is no longer the only game in town. “Since Christmas, trends have made a major shift,” said Mike O’Rourke from Jones Trading, who originally coined the term “Magnificent Seven.”
Money managers are now moving into other industries. According to Bank of America, “US bank stocks attracted almost $2bn of inflows — the second-largest weekly figure since 2008.” Healthcare, gold, and European equities have also benefited as investors rebalance their portfolios.
The Private Magnificent Seven: A New Contender Emerges
While Big Tech faces challenges, a new group of privately held AI-focused firms is drawing investor interest. “Investors have also been pouring money into privately held tech companies including Anthropic, Coreweave, Databricks, OpenAI, Perplexity, ScaleAI and xAI — which some now refer to as the ‘Private Magnificent Seven.’”
Price data obtained by the Financial Times shows that “the cumulative valuation of the group rose 40 per cent between July and the end of January, easily outpacing the public Magnificent Seven over the same period.”
“Historically, it was never the incumbents which benefited from technological disruption, but the outsiders,” said Mislav Matejka, head of global equity strategy at JPMorgan. These emerging AI players may be setting the stage for a broader market shift.
AI Spending Weighs on Big Tech
One of the biggest questions surrounding the Magnificent Seven is whether their aggressive AI investments will pay off. Meta, for example, has cut employee stock awards by 10% to help finance its AI infrastructure. Meanwhile, Microsoft has faced stock dips despite its advancements in AI.
JPMorgan analysts caution that “faster AI adoption and fewer barriers to entry than anticipated after China’s DeepSeek stunned the market last month with its cut-price AI service could spell long-term danger for the Magnificent Seven.” If this trend continues, it could spell trouble for the current tech leaders.
What This Means for Investors
The market is undergoing a fundamental shift. While the Magnificent Seven are no longer the sole drivers of growth, their influence hasn’t vanished. “No member of the Magnificent Seven besides Meta — whose shares on Friday closed higher for a historic 20th consecutive session — even makes it to the list of top 50 growth stocks in 2025.”
For investors, this signals an opportunity to diversify. With hedge funds moving into other industries and smaller tech firms gaining traction, broadening portfolios could be a strategic move in 2025.
The Bottom Line
The Magnificent Seven may no longer dominate Wall Street as they once did, but they’re not out of the game just yet. As AI reshapes the market and new challengers emerge, the landscape is evolving. “It would be premature to write off the stocks that have driven the market for so long,” said Matejka. However, the days of easy Big Tech gains may be coming to an end.