The "Magnificent Seven" — Nvidia Corp., Alphabet Inc., Apple Inc., Microsoft Inc., Amazon.com Inc., Meta Platforms Inc., and Tesla Inc. — are no longer leading the US stock market, with strategists and investors now considering the term "obsolete." This change reflects a significant dispersion in performance among these companies and a shift in investor focus towards new beneficiaries of AI spending, primarily memory chip producers like Micron Technology Inc. and SanDisk Corp. The Philadelphia Stock Exchange Semiconductor Index is up 82% in 2026, marking its best year since 1999, while an index of the Magnificent Seven has gained only 1.1%.
Investors are growing skeptical of the original tech giants' heavy AI investments, which are weighing on cash flows without clear returns. Deutsche Bank strategists noted that while positioning in large-cap tech was "extreme" in late May, it has since returned to a more neutral stance. This sentiment led to investors pulling $786 million from the Roundhill Magnificent Seven ETF in June, the most on record, while pouring $9.3 billion into the Roundhill Memory ETF.
The correlation between the Magnificent Seven and the Nasdaq 100 has significantly dropped, indicating a decoupling from the broader market. Performance among the remaining six stocks has been mixed, with Alphabet leading due to AI potential, while Microsoft is down 20% in 2026, experiencing its worst month since 2000 due to concerns about aggressive AI spending. Mark Zuckerberg, CEO of Meta, reportedly stated that AI agent development has not "accelerated in the way we expected." Earnings estimates for the Magnificent Seven have been revised downwards, from a 21.4% increase three months ago to an 18.9% increase for next year, while chipmakers' estimates surged from 34.3% to 48.5%.
Despite the recent shift, the Magnificent Seven still hold substantial weight in the market, representing about 37% of the Nasdaq 100 and almost a third of the S&P 500. Some analysts, like JPMorgan's Nikolaos Panigirtzoglou, suggest that the gap between these tech giants and the new AI leaders may eventually close as monetization, revenues, and earnings improve for hyperscalers and AI model providers. However, others, like Morgan Stanley's Mike Wilson, observe a fading momentum in chip stocks and a potential shift back to this year's laggards, including AI hyperscalers, indicating that the current divergence may not be sustainable.
