The Magnificent 7’s AI-driven growth story is facing a reality check.
The best-performing stocks of the past decade are coming under pressure as investors question the enormous cost of the AI arms race and rotate into new fields with stronger momentum.
Microsoft (MSFT) is down 33% from its recent highs, while Meta (META) has dropped 28%. Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA) and Alphabet (GOOGL) are all trading more than 10% below, with Apple (AAPL) the best performer at -7%.
The rotation extends to crypto too. Bitcoin BTC$63,875.87 has slumped about 50% from its October all-time high.
It’s not as though capital has given up on AI entirely. Instead, it’s flowing into the companies that provide the infrastructure that the boom feeds on. Beneficiaries include chipmakers, including memory-chip producers, and real estate, needed to host the vast server farms that support AI processing.
The biggest winners from the rotation have been memory and semiconductor stocks. Memory-chip maker Sandisk (SNDK) has surged roughly 800% this year and the Global X Artificial Intelligence & Technology ETF, which focuses on memory-related companies (DRAM), is up about 140%. In microprocessors, Micron Technology (MU) has gained about 230% this year, and the VanEck Semiconductor ETF (SMH) 67%.
The investments highlight a growing preference for the companies supplying the infrastructure behind the AI boom rather than the hyperscalers funding it.
In addition, capital has been attracted SpaceX (SPCX), Elon Musk’s space exploration company that is also expanding into AI. Last week, the company raised $75 billion in the largest IPO in history.
While AI has become the market’s dominant investment theme, the cash required to feed the growth is rising even faster. Google parent Alphabet (GOOGL), Amazon, Microsoft and Meta are expected to spend a combined $725 billion on capital expenditures this year, a 77% increase from last year’s record level.
Free cash flow is no longer fully funding these ambitions. Alphabet, Amazon and Meta, collectively borrowed some $93 billion last year, accounting for roughly 6% of total corporate bond issuance.
Another source of support is also fading. Share repurchases have fallen 33% to $132 billion in 2025, reducing a key pillar of demand for these stocks.