Wall Street No Longer Blindly Buys the Magnificent Seven! AI Capital Begins Massive Relocation

This week's earnings season has thoroughly shattered the market's existing perception of the 'Magnificent Seven.' These seven stocks, once seen as representing the first wave of the artificial intelligence (AI) boom under a unified investment logic, are now clearly diverging in performance, capital expenditure returns, and stock prices—the 'Magnificent Seven' is no longer a cohesive group.

Vanguard's recent analysis shows that while the S&P 500 Index has risen about 9% year-to-date, the Magnificent Seven have declined by 1%, underperforming the broader market. Meanwhile, capital is flowing into AI infrastructure builders, energy companies, and semiconductor manufacturers.

Vanguard has identified 45 companies across a broader AI supply chain whose combined market value has doubled this year—excluding Alphabet (GOOGL-US), Amazon (AMZN-US), Meta (META-US), Microsoft (MSFT-US), and Oracle (ORCL-US). Vanguard economist Shaan Raithatha notes that investors are exiting large-cap tech stocks and moving into companies producing physical components and infrastructure in high market demand.

Just as the 'FAANG' group—Facebook, Amazon, Apple (AAPL-US), Netflix (NFLX-US), and Google—eventually lost relevance as a single investment theme, the Magnificent Seven may be following a similar path. Despite increasingly tight supply chain investments among members, each company’s growth narrative and investment value are now splitting apart.

AI Spending Enters the Results Verification Phase

Microsoft, Meta, Alphabet, and Amazon—all hyperscale cloud providers—are developing proprietary AI hardware while investing in or partnering with AI software firms. Their massive capital expenditures have driven the overall AI market, but investors are no longer treating them uniformly, instead scrutinizing whether each company can convert spending into actual revenue and profit.

Meta this week again raised its spending forecast, causing its stock to fall. Analysts are particularly puzzled that Meta is simultaneously purchasing computing resources from third parties while planning to monetize surplus capacity externally. Doug Anmuth, JPMorgan analyst, directly asked CEO Zuckerberg during the earnings call why the company would both buy and sell computing power.

Microsoft, however, surged after Azure cloud revenue grew 43% with unchanged capital expenditure guidance, signaling improving AI investment returns. FactSet data shows Microsoft’s stock rose 4.8% over the past six months.

Alphabet reported second-quarter EPS below expectations and increased its 2026 capital expenditure forecast by $15 billion. Amazon also raised its capex estimate by $20 billion on Thursday, but AWS cloud division margin expansion convinced the market its AI spending will yield returns, earning investor approval.

Apple, Tesla, and Nvidia Each Take Separate Paths

The remaining three companies are also taking divergent paths. Apple was initially criticized for not heavily investing in AI infrastructure, yet its stock rose 16.4% over the past six months. However, concerns over memory shortages and rising component costs caused it to plunge nearly 10% on Friday.

Tesla (TSLA-US) saw its stock drop 27% over the same period, with free cash flow turning negative in Q2. Nvidia (NVDA-US) rose only about 3.6% over the past six months. The AI chip leader now faces more players entering the GPU market—some of whom are even its own cloud customers.

Nvidia previously acknowledged in financial filings that some clients are developing their own application-specific integrated circuits (ASICs) and other products optimized for specific workloads, which may not require all the functionalities offered by Nvidia’s data center systems.

This round of earnings shows that the AI boom hasn’t ended—but the investment logic has shifted from 'buy all large tech stocks' to evaluating capital efficiency and supply chain beneficiaries. The true AI winners going forward may no longer be the familiar Magnificent Seven, but rather the companies supplying chips, power, and physical infrastructure fueling this construction wave.