Introduction to the Seven Magnificents
The Seven Magnificents are the seven largest technology companies globally. Known as growth stocks, their market capitalization values are primarily supported by market expectations rather than business results. In 2025, these companies fell short of the S&P 500 benchmark.
S&P 500 Performance in 2025
The S&P 500, consisting of around 500 key market companies, including the seven tech giants due to their significant weight in index composition, reported a return of nearly 16% for the year. Although this advance was lower than previous years, it still exceeded a historical average of approximately 8%.
Seven Magnificents’ Underperformance
Most of the Seven Magnificents underperformed in 2025. Only Alphabet, the parent company of Google (+51.48%), and Nvidia (+37%) managed to surpass the S&P 500 benchmark. This poor performance can be attributed to specific factors in each case, as well as a shared concern among investors.
Investor Concerns Regarding AI Investments
The primary source of worry was the high capital expenditure (capex) allocated to artificial intelligence projects, coupled with demanding valuations that pushed these companies to record levels. This enabled major indices to register double-digit advances for three consecutive years, raising doubts in the market.
“If companies start cutting capital expenditure that they had previously anticipated and the market loses confidence in returns from AI investments, we might face a flat or slightly declining 2026,” said Jeff Buchbinder, Chief Equity Strategist at LPL Financial in a note.
Shift in Investor Behavior
In this context, along with portfolio rotation towards sectors with fewer prospects, the Seven Magnificents stopped behaving as a cohesive group and began trading more selectively this year. This shift was even reflected in hierarchical changes, as Alphabet surpassed Microsoft in value.
Alphabet’s Strong Finish
Towards the end of the year, Alphabet’s stocks rallied strongly following a report on Gemini 3’s performance, which outperformed Microsoft-backed ChatGPT in several aspects. Additionally, Alphabet announced plans to develop its own AI chips, distancing Nvidia from its historical peak.
Key Questions and Answers
- What are the Seven Magnificents? The Seven Magnificents refer to the seven largest technology companies globally, including Alphabet (Google’s parent company) and Nvidia.
- Why did the Seven Magnificents underperform in 2025? Their underperformance can be attributed to high capital expenditure on AI projects, demanding valuations, and investor concerns about returns from AI investments.
- What caused the shift in investor behavior? Investors rotated their portfolios towards sectors with fewer prospects and expressed concerns about the high capex allocated to AI projects.
- How did Alphabet manage to outperform others? Strong stock performance was driven by superior Gemini 3 performance compared to ChatGPT and plans to develop its own AI chips, reducing reliance on Nvidia.
