The Magnificent Seven tech stocks — Nvidia, Microsoft, Amazon, Meta, Apple, Alphabet, and Tesla — have underperformed this year, with the cohort down an average of 3.1% through Friday's close, while the S&P 500 gained approximately 8.7% over the same period. The decline suggests investors are questioning the profitability of AI investments and rotating capital away from companies spending on AI toward equipment suppliers such as Micron Technology and Intel. Market observers have dubbed the once-dominant group the 'Lag 7,' marking a significant shift from their 2023 performance when the stocks gained over 110% on average following ChatGPT's release in late 2022.
Magnificent Seven Post 3.1% Average Decline This Year
The Magnificent Seven stocks were down an average of 3.1% this year through the close of trading on Friday, according to the source data. This contrasts sharply with the S&P 500, which was up about 8.7% over the same period.
Microsoft Records Worst Monthly Decline Since Late 2000
Microsoft has declined 18.1% in June, placing the company on track for its worst monthly decline since late 2000. Meta has tumbled 11% in June through Monday's close. Amazon has fallen 11.2%, while Apple has slumped 9.7% during the same period.
Apple and Microsoft Raise Product Prices Due to Memory Chip Costs
Apple and Microsoft both announced product price increases driven by the soaring costs of memory chips. Memory chip prices have exploded as a result of demand from AI data centers. Rising AI costs have contributed to other tech companies — Alphabet for instance — raising billions of dollars more in capital, potentially diluting the value of existing shareholders. UBS Global Wealth Management analysts wrote that "this month points to increasing shareholder pressure to justify [companies' AI] spending."
Broadcom and Micron Surge as Chip Suppliers Gain
Chip makers such as Broadcom and Micron — both tied to the AI boom — have been soaring even as the Magnificent Seven has lagged behind. Investors are rotating away from those spending on AI to those supplying the equipment, such as Micron Technology and Intel.
Magnificent Seven Gained Over 110% in 2023
The Magnificent Seven moniker became closely associated with big market winners in the early days of the AI narrative. In late 2022, ChatGPT was released and the resulting AI frenzy helped end a bear market brought on by the outbreak of inflation and Federal Reserve interest rate increases. Seven giants — Apple, Alphabet, Amazon, Nvidia, Microsoft, Meta and Tesla — posted average gains of over 110% in 2023, earning them their nickname.
FAQ
What is the Magnificent Seven's performance this year?
The Magnificent Seven stocks were down an average of 3.1% this year through Friday's close, while the S&P 500 was up about 8.7% over the same period.
Why did Microsoft decline 18.1% in June?
Microsoft declined 18.1% in June, on track for its worst monthly decline since late 2000. UBS Global Wealth Management analysts stated that "this month points to increasing shareholder pressure to justify [companies' AI] spending," suggesting investor concerns about AI investment profitability contributed to the decline.
Which chip suppliers have gained while the Magnificent Seven declined?
Chip makers such as Broadcom and Micron — both tied to the AI boom — have been soaring even as the Magnificent Seven has lagged behind, as investors rotate toward equipment suppliers rather than AI spenders.
