AI’s Playing Favorites With The Magnificent Seven, And You Should, Too

• AI is reshaping Big Tech, splitting the Magnificent Seven into clear leaders (Nvidia, Microsoft, and Meta) and laggards (Apple, Tesla, Alphabet, and Amazon).
• The divide comes from the firms’ business models, their speed of AI adoption, and investor appetite for visible, near‑term revenue tied to AI.
• Active strategies – overweighting AI leaders, rotating selectively into laggards, and diversifying into smaller AI plays – will likely be more effective than making a blanket bet on the group.

The Magnificent Seven – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla – were the easiest trade of 2023 and 2024. Own them all, and you catch every growth wave with barely a thought. This year, that shortcut hasn’t worked out in quite the same way. AI hasn’t been lifting everyone equally – it’s been splitting the group into winners and stragglers.

Nvidia, Microsoft, and Meta are turning AI into revenue and keeping investors happy, even at steep valuations. Amazon, Apple, Tesla, and Alphabet still have size and clout, but slower growth, increased margin pressure, and muddled AI strategies have taken some of the shine off.

So let’s dig into what’s driving the split, who’s on the right side of it, and how to position yourself as the story plays out.

Why the group’s fortunes are diverging

The split between AI winners and stragglers runs deep. The first crack shows up in how these companies make money. Nvidia’s data center sales and Microsoft’s cloud services are built to capture AI demand, while Apple’s fortunes still swing with the iPhone cycle – a pattern that’s tied to consumer upgrades, rather than AI’s unrelenting boom.

The year-to-date price performance of the Magnificent Seven stocks has diverged in recent months. Sources: KoyFin, Finimize.

Capital intensity and speed are also setting the pace. Meta has used AI to cut costs and make its advertising machine purr, giving margins a boost in the process. Tesla, on the other hand, has been tied up in a slower, more expensive race to make self-driving technology roadworthy – a bet that so far has drained resources without the kind of payoff Wall Street had hoped for. Alphabet’s AI labs, meanwhile, are world-class, but its products have rolled out slowly, with regulators breathing down its neck. And that’s left Microsoft free to suck up ad dollars and consumer attention with its AI-powered search and productivitytools.

Investors happily hand over premium price tags when a company has visible, near-term AI revenue. Without that clarity, though, stocks get punished when interest rates rise or growth forecasts slip. The divergence, in short, isn’t just about earnings power – it’s also about which companies can convincingly sell their growth story.

That backdrop is why Nvidia, Microsoft, and Meta seem unstoppable right now – and why Apple, Tesla, and Alphabet might continue to carry more risk than reward until they prove otherwise.

The AI leaders driving market optimism

That first camp (Apple, Tesla, and Alphabet) is made up of the companies that are already turning AI into dollars – with revenues, margins, and guidance that prove that the tech’s growth story is real.

Nvidia is still the cornerstone of the AI economy. Its chips power most of the models worth talking about, and the demand from cloud giants and other enterprises is so strong that its latest products are effectively sold out before they can launch. That imbalance hands Nvidia pricing power, cash flow, and a clear runway to keep investing in the next generation of hardware.

Microsoft is threading AI through its entire business, from Azure to GitHub to Office. By baking AI into tools companies already rely on, it’s locking in customers while opening up new ways to charge for its services. Azure’s position as a preferred AI partner is helping Microsoft hold its own against Amazon Web Services (AWS), and that cloud growth is propping up the multiple that investors are willing to pay.

Meta, on the other hand, is finding growth not by reinventing the wheel, but by making it spin faster. Its AI tools are squeezing more value out of every ad by improving targeting and content recommendations. That efficiency is expanding margins, giving Meta the cash to keep funding long-term bets like virtual reality and mixed reality without scaring off investors.

The laggards facing strategic and market pressures

Apple’s growth still depends on iPhone cycles and hardware upgrades, because its AI roadmap is only just emerging. And that does make things tricky, to be honest. Without a near-term AI driver, Apple’s premium valuation is harder to defend in a market determined to reward AI innovators.

Meanwhile, Tesla’s bet on self-driving (which is, essentially, AI) has become a drag. Progress is still slow, competition is rising, and margin-eating price cuts have hurt sentiment.

Alphabet’s heavy AI spend (on stuff like Google Cloud and DeepMind) hasn’t yet translated into revenue momentum. Its core search business also faces pressure as tools like ChatGPT and Perplexity change how users find information, threatening ad revenue and the valuation it commands.

Amazon’s AWS continues to grow and invest in AI with partners like Anthropic. But slowing ecommerce growth has left the stock lagging. Until AI meaningfully lifts overall growth, Amazon’s valuation isn’t likely to improve.

For investors, these lagging players carry more risk, without clear AI-led growth paths. That doesn’t mean they’re automatic “sells” – but it does mean that their entry points and potential portfolio allocations might be worth a closer look.

What earnings season will reveal

These companies’ quarterly updates will show whether the performance gap might soon narrow. I’ll be watching for growth in AI-driven revenue lines, how well cloud businesses hold up, and whether margins remain stable despite heavy AI spending. Forward guidance on capital expenditures and new product rollouts will matter just as much – it’s often where companies can claw back lost ground.

Partnerships, acquisitions, and strategic alliances will also play a bigger role. Laggards that can buy or partner their way into competitive AI offerings might finally get a spark. Those that stay vague or slow, meanwhile, risk falling further behind, no matter how strong their legacy businesses are.

And the market’s reactions to these updates could set the tone for the rest of the year. If the numbers confirm the current split, I expect investors to treat this group of seven less as a single trade and more as three buckets: leaders, transitional players like Amazon, and those that risk losing their “must-own” status.

And that means you’ll want to choose carefully among them, monitor their performances closely, and adjust your positioning as needed to get the returns you want. Just owning the group and hoping for the best won’t cut it.

Positioning for the new big tech order

This new split has changed how I think about Big Tech in my portfolio. After all, a blanket bet on the Magnificent Seven – whether through an ETF or index-heavy allocation – risks letting slowpokes drag down the sprinters. So, here’s what I’m doing:

• Overweighting the clear AI monetizers – Nvidia, Microsoft, and Meta – where earnings visibility and strong balance sheets make the growth more durable.
• Looking for savvy entry points in laggards like Amazon, Apple, Tesla, and Alphabet. I’m waiting for a valuation reset or an earnings update that points to real AI-driven growth ahead.
• Considering pair trades or hedges – long the leaders, short the laggards – to capture the performance gap without betting on the broader market direction.
• Rotating actively within the group, rather than treating it as a one-click trade – separating leaders, transitional names like Amazon, and those still struggling to justify their multiples.
• Adding exposure beyond the giants – looking instead to mid-cap AI players or niche tech ETFs – to capture growth where adoption curves are still steep.

The Magnificent Seven aren’t over, but they’re no longer a collective, sure thing. AI has turned them into a set of individual stories, and I’m finding it pays to treat them that way – picking spots, managing risk, and letting the market reward the companies that can actually turn hype into hard numbers.
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Originally Posted on July 24, 2025 – AI’s Playing Favorites With The Magnificent Seven, And You Should, Too