The “Magnificent Seven” have dominated the U.S. market for years and sat on a combined valuation of $21.7 trillion as of Tuesday’s close. That number, however, masks how much they lost in June. The group — which Microsoft , Nvidia , Alphabet , Apple , Meta , Tesla and Amazon — shaved off roughly $2 trillion in market cap, as investors are starting to reassess the investing case for these once unbeatable mega-caps. The Roundhill Magnificent Seven (MAGS) , an exchange-traded fund tracking these seven tech giants on an equal-weighted basis, fell 9% in June, marking the second worst month for the fund since it’s 2023 launch. Only March 2025, when it fell 10.5%, was worse for the fund. One reason behind the underperformance: These companies once coveted for their hefty cash flows have turned into big spenders as they devote most of that cash for the artificial intelligence race. Apollo Global Management’s chief economist Torsten Slok noted that free cash flow for at least four of the firms making up the group — namely Meta, Alphabet, Microsoft and Amazon — fell sharply from its 2024 peak into 2026. With AI spending projected to exceed $700 billion this year , soaring capital expenditures on AI has raised concerns for investors used to sizable buybacks from these companies as a buffer to their investments. These companies are investing heavily in AI hardware due to increased conviction in its importance, Gene Munster, managing partner at Deepwater Asset Management told CNBC’s “Fast Money ” last week. Munster believes the focus is more on the company’s leadership being competent and their understanding of the long-term potential of AI investments and if they understand that, then such investments could lead to accelerating revenue growth and a return on investment down the road. Mag 7 stocks under pressure All stocks in the group were in the red for June, with Microsoft falling 17% for the month, recording its biggest month decline since December 2000. Microsoft had recently told investors that its capital spending could reach $190 billion in 2026 on soaring memory prices. Overall returns for the tech giants have not been evenly distributed. Amazon had the second biggest decliner of the group at 12%, followed by Meta’s 11% slide. Apple’s stock lost 7.3% during the month of June. Alphabet, Nvidia and Tesla all declined 6%, 5.2% and 3.5%, respectively. Still, some on Wall Street see the pullback as overdone. In a Monday sales commentary note, Bank of America remained bullish on hyperscalers such as Amazon and Alphabet, along with Oracle . Oracle, however, is not a Mag 7 member. Semiconductors outpace MAGS The pullback in the Mag7 especially stands out against the semiconductor hype, which has continued to surge over the past year. In the first half of the year, the iShares Semiconductor ETF (SOXX) rose 113%, compared to a loss of 2.5% on MAGS. The divergence shows investors are rewarding those making the key parts of the AI buildout, especially chips, and penalizing those paying for it.
