The Magnificent 7—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla—have been the engine driving the stock market's extraordinary rally over the past three years. But a notable shift is underway: profits for these tech giants are expected to climb about 18% in 2026, marking the slowest pace of earnings growth since 2022 when the Federal Reserve began its aggressive rate-hiking campaign.

The Numbers Behind the Slowdown

For the first time since 2022, the majority of the Magnificent 7 actually underperformed the broader S&P 500 in 2025. While the Bloomberg Magnificent 7 Index rose 25% compared to 16% for the S&P 500, that outperformance was driven almost entirely by just two stocks: Alphabet and Nvidia.

The index's 2025 return masked significant divergence beneath the surface. Several of these tech titans struggled to justify their premium valuations as the easy gains from AI hype gave way to harder questions about monetization and capital efficiency.

The Spending Problem

Perhaps no stock illustrates the shifting investor sentiment better than Meta Platforms. CEO Mark Zuckerberg has pushed expensive acquisitions and talent hires in pursuit of his AI ambitions, including a $14 billion investment in Scale AI in which Meta also hired the startup's CEO Alexandr Wang as its chief AI officer.

The stock tumbled in late October after Meta raised its 2025 capital expenditure forecast to $72 billion and projected "notably larger" spending in 2026. When shares hit a record in August, they were up 35% for the year—but have since dropped 17%.

"With Big Tech's earnings growth slowing, investors are no longer content with promises of AI riches—they want to start seeing a return."

— Bloomberg Analysis

Where the Money Is Going

The collective AI infrastructure spending by the Magnificent 7 has reached staggering levels. Combined capital expenditures across these companies are projected to exceed $600 billion through 2026, with data centers, custom chips, and AI compute infrastructure consuming the bulk of investment.

The question investors are asking: when does this spending start generating meaningful returns? Unlike previous technology cycles where the path from investment to profit was clearer—think cloud computing adoption in the 2010s—the AI monetization timeline remains murky for most applications outside of premium subscriptions and advertising.

The Winners and Losers

Within the Magnificent 7, a clear hierarchy is emerging:

  • Alphabet: A year ago, OpenAI was seen as leading the AI race and investors feared Alphabet would get left behind. Today, Google's parent is a consensus favorite, with dominant positions across the AI landscape and its fastest-growing Google Cloud Platform business
  • Nvidia: Continues to benefit from the AI buildout, though faces increasing competition from custom chip solutions
  • Microsoft: Its OpenAI partnership generates significant buzz, but questions linger about sustainable differentiation
  • Amazon: After being the weakest Magnificent 7 performer in 2025, Amazon has led the group to start 2026
  • Meta: The most controversial story, trading at what Morningstar calls a 24% discount to fair value even as spending concerns mount

What It Means for the Broader Market

The Magnificent 7's earnings deceleration may actually be healthy for market dynamics. For years, these stocks dominated index returns to such an extent that the S&P 500 became an increasingly concentrated bet on Big Tech.

With the earnings growth gap narrowing between mega-caps and the rest of the market, the case for market breadth strengthens. Small and mid-cap stocks, which have lagged for years, may finally get their moment as investors seek value outside the most crowded trades.

The 2026 Outlook

Wall Street remains broadly optimistic about the Magnificent 7, but expectations are more measured than in previous years. DWS anticipates the S&P 500 will reach 7,500 points by year-end on AI-driven growth, while Deutsche Bank projects 8,000—both forecasts assume continued Big Tech contribution but not dominance.

For investors, the message is nuanced: the Magnificent 7 aren't going away, but the era of indiscriminate Big Tech outperformance may be ending. Stock selection within the group—distinguishing companies actually monetizing AI from those still in spending mode—will matter more in 2026 than simply buying the index.

The transition from AI investment to AI returns has begun. The companies that navigate it successfully will justify their valuations; those that don't will face increasingly impatient shareholders demanding accountability for the hundreds of billions deployed in pursuit of artificial intelligence supremacy.