2 min read
The once high-flying “Magnificent Seven” are looking more like the Dreadful Seven.
Quick insight: Longtime Magnificent Seven fans are being reminded of a golden rule when it comes to investing: No stock is indestructible.
Since peaking in mid-May, Magnificent Seven stocks are down more than 13%, 22V Research strategist Jeff Jacobson pointed out. Both the Invesco QQQ Trust (QQQ) and the S&P 500 (^GSPC) are down only about 2% over that time.
The performance is even worse when looking at the Magnificent Seven names versus their 52-week highs:
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Amazon (AMZN): -11%
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Apple (AAPL): -11.7%
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Meta (META): -14.4%
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Nvidia (NVDA): -18.5%
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Tesla (TSLA): -32.6%
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Microsoft (MSFT): -32.9%
The why: Wall Street is growing increasingly impatient with Big Tech’s astronomical capital expenditures on artificial intelligence, projected to balloon 70% to exceed $700 billion this year.
This aggressive, unyielding infrastructure 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.
Sprinkle in concerns about a Fed rate hike later this year — which would increase the cost of financing for AI projects — and it makes good sense that this group is sucking wind on the stock charts.
“We are going through another ‘gut check’ few weeks ahead for the tech trade as tech investors await a very important 2Q earnings season in July to further validate the AI Revolution buildout,” Wedbush tech analyst Dan Ives said in a note. “In the meantime jitters will continue as worries around the costs of this once in a generation tech buildout hit its next gear of growth.”
Bottom line: The Magnificent Seven names are now “show me” stories for investors — as in, show me when you will make money from massive infrastructure investments related to AI. However, it’s unlikely this proof point will happen in second quarter earnings season.
Brian Sozzi is Yahoo Finance’s Executive Editor 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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