For years, outperforming the market was straightforward: buy the biggest U.S. technology stocks and hold on. That approach finally lost its edge last year, Bloomberg News reported Sunday.
In 2025, most of the so-called Magnificent Seven lagged the S&P 500 (SP500) for the first time since the Federal Reserve began raising rates in 2022. The group still posted strong gains overall, but those returns were heavily concentrated in just a few names, particularly Alphabet (GOOG) (GOOGL) and Nvidia (NVDA).
Strategists expect that uneven performance to persist in 2026 as earnings growth cools and investors grow more skeptical about whether massive artificial-intelligence spending will deliver adequate returns. Early trading this year has reinforced that view, with the broader market outperforming the tech heavyweights.
The three-year bull market has been dominated by Big Tech, with Microsoft (MSFT), Apple (AAPL), Alphabet (GOOG) (GOOGL) and Nvidia (NVDA) driving more than a third of the S&P 500’s gains since late 2022. But momentum is spreading to other sectors as enthusiasm for AI-driven growth cools.
Profit growth for the Magnificent Seven is expected to slow to the high-teens in 2026, only modestly ahead of the rest of the index. That shift is pushing investors to become more selective rather than treating the group as a single trade.
Valuations have also become less extreme. While the group still trades at a premium to the market, multiples are well below peaks seen earlier in the decade, easing fears of an immediate bubble but offering less room for disappointment.
Nvidia (NVDA) remains the market’s preferred AI play despite rising competition and concerns about how long customers can sustain heavy spending. Analyst sentiment remains overwhelmingly positive, even after the stock pulled back from recent highs.
Microsoft (MSFT) faces greater scrutiny. Its massive data-center investments are reviving cloud growth, but investors want clearer evidence that AI features embedded across its software portfolio will translate into profits.
Apple (AAPL), by contrast, has benefited from its restrained AI spending. Strong iPhone sales and limited capital risk helped the stock rebound last year, though its premium valuation leaves little margin for slower growth.
Alphabet (GOOG) (GOOGL) has emerged as a consensus favorite after convincing investors it can compete aggressively in AI while monetizing its own chips and models. After last year’s sharp rally, however, analysts see limited upside from current levels.
Amazon (AMZN) has started 2026 strongly after lagging last year, with renewed optimism around Amazon Web Services and efficiency gains from automation and robotics.
Meta Platforms (META) illustrates investor unease with unchecked AI spending. After raising capital-expenditure forecasts, the stock retreated from record highs, leaving the company under pressure to prove its investments can boost earnings.
Finally, Tesla (TSLA) stands apart. Its valuation reflects lofty expectations for robotics and self-driving technology rather than near-term profits, even as analysts forecast renewed revenue growth next year.
The takeaway for investors is clear: the era of buying the Magnificent Seven as a single trade is fading. In 2026, winners and losers inside Big Tech may diverge sharply, according to Bloomberg News’s report.