Magnificent 7 selloff: is the big tech stock rally over?

Big tech stocks, in particular the ‘Magnificent Seven’, have dominated the stock market for over two years, but does a recent selloff signal the end of their spell of supremacy?

At the start of 2023, seven tech companies accounted for approximately a fifth of the S&P 500 between them. Two years on – having been constantly among the most-bought stocks in the world ever since – the group, dubbed the ‘Magnificent Seven’, now comprises over 30% of the S&P 500 index.

This saturation means that, in effect, all investors are exposed to these big tech stocks. Whether or not you own them directly, any stock market tracker funds, the likes of which will likely form a large part of your pension, will have significant exposure to the Magnificent Seven group.

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But should you be worried about the recent major sell off the Magnificent Seven have suffered over recent weeks?

“In recent years, the US market has been driven by a handful of technology stocks, creating a market heavily reliant on a single sector,” says Tom Stevenson, investment director at Fidelity International. “But as market conditions have shifted and with increasing geopolitical uncertainties, cracks in the dominance of US equities are becoming apparent.”

“Investors that may have been drawn to the technology sector by ‘exciting’ growth strategies will have likely hit the ground recently with a bit of a bump, as this area of the market had been bid-up so much over the last couple of years,” says William Marshall, chief investment officer at Hymans Robertson Investment Services.

The question is: does the selloff, which has seen the S&P 500 fall 5.3% and the Nasdaq 100 fall 8.6% so far in 2025, signal a buying opportunity for investors that still back these big tech stocks?

Or, is the AI boom bursting like the dotcom bubble did twenty-five years ago?

Who are the Magnificent Seven stocks?

The Magnificent Seven – often abbreviated to ‘Mag7’ – comprises seven big tech stocks that the investing community perceives as being the leading exponents of technology in general and artificial intelligence (AI) in particular.

They are:

• Alphabet (NASDAQ:GOOGL) – the parent company of Google, as well as other companies such as the AI developers DeepMind and Anthropic;
• Amazon (NASDAQ:AMZN) – originally an online bookstore, now a giant of e-commerce and, via Amazon Web Services (AWS), cloud computing;
• Apple (NASDAQ:AAPL) – the tech hardware company that brought the world the MacBook and the iPhone;
• Meta (NASDAQ:META) – formerly Facebook, the company is now heavily focused on ‘Metaverse’ technology as well as AI products, like Llama model;
• Microsoft (NASDAQ:MSFT) – the computing giant behind the Windows operating system and the Azure cloud platform;
• Nvidia (NASDAQ:NVDA) – the hardware developer that pioneered GPUs, the chips that power AI data centres;
• Tesla (NASDAQ:TSLA) – the electric vehicle (EV) manufacturer that, according to CEO Elon Musk, is aiming to crack autonomous driving.

The term ‘Magnificent Seven’ was coined by Bank of America analyst Michael Hartnett in 2023. By then, the group was already starting to dominate the stock market in the wake of the AI and tech stock mania that followed the public launch of ChatGPT in late November 2022.

While each company is distinct, there are some general similarities that apply to most, if not all, of the group.

All are (or at least have been) incredibly innovative; Apple’s products have revolutionised personal computing, Meta made social media mainstream, and Tesla has demonstrated the viability of EVs.

Most are also highly diversified. Even if a specific product made a company like Meta or Amazon famous, these megacap companies now have their fingers in all sorts of technological pies – favourites being cloud computing and, of course, AI.

All the companies in the group are involved in AI, albeit in different ways and to varying degrees (Apple, for example, has drawn criticism for failing to develop its own AI products as fast as its counterparts).

Their key similarity, though, is their stock market dominance. At the time of writing, they comprise seven of the world’s eleven largest companies by market capitalisation. All except Tesla have a market cap of over $1 trillion (Tesla’s has fallen from $1.4 trillion at the end of December to $742 billion at the time of writing).

Latest Magnificent Seven News

The Magnificent Seven as a group received a major shock, along with the wider US stock market, in late January as Chinese AI start-up DeepSeek emerged as a cheaper alternative to ChatGPT.

This weighed to varying degrees on the stocks throughout big tech earnings season.

However, the Magnificent Seven selloff really hit its stride thanks to the haphazard trade policy machinations of US president Donald Trump, who has seemingly started a global trade war through the imposition of swingeing tariffs.

The fear is that this could prompt US inflation to rise, although the latest read shows a slight cooling of US prices in February. However, depending on how the tariff dispute plays out, it could hinder the US economy.

“The impact of potential tariffs from the US has led to some anxiety amongst investors, leading to profit-taking and a change in sentiment to a more risk-off strategy,” says Marshall. “It looks like this change in wind is leading to a rebalancing away from these more expensive assets.”

Alphabet

Alphabet’s share price fell 4.2% on 27 January, following the news that DeepSeek was able to outperform ChatGPT at a fraction of its financial and compute costs.

“We’ve seen internal concern from Google that OpenSource AI diminishes their business moat,” said Tom Bailey, head of research at HANetf.

The stock fell further still on 5 February, following an earnings report that saw a slow-down of cloud revenue growth from Alphabet’s crucial Google Cloud Platform segment. Overall, GOOGL shares are down 13.3% in the year to 11 March, but have gained 8.5% over the last six months.

On 2 March, Google announced the development of its Taara chip, which uses light beams to power high-speed internet. Developed within X, Alphabet’s ‘moonshot’ factory, the chip is roughly the size of a fingernail, compared to the traffic light-sized hardware that the first generation of the technology used, according to Engadget.

Amazon

Like Alphabet, investors were more concerned about a slowing of cloud revenue growth than the headline figures when Amazon announced earnings on 6 February. Amazon’s shares fell 4.1% the following session, with investors downbeat about the long term implications of DeepSeek’s lower AI compute requirements on AWS’ prospects.

Amazon’s share price is up 6.5% in the six months to 28 February, but it has fallen 10.4% in the year to date.

Apple

Apple’s share price is down 0.8% in the six months to 11 March, and is 11.8% down since the start of 2025.

The DeepSeek shake-up played out well for Apple, cementing its position as the world’s most valuable company; its shares gained 3.2% on 27 January, while rivals Microsoft and Nvidia retreated.

However, weakening iPhone sales, particularly in China, have weighed on the stock, and this was brought to bear in its Q1 2025 earnings, announced on 30 January. Apple’s shares fell 0.5% in after-hours trading following the results.

Meta

Meta’s share price enjoyed one of the longest winning streaks in stock market history this year; on 14 February, Meta stock gained for the 20th consecutive session.

Since then, though, Meta’s share price has fallen by 17.8%, leaving the stock trading 3.4% up this year and 18.3% up over the last six months.

Meta was seen as a winner from DeepSeek’s appearance on the AI scene.

“Meta’s scale, data advantage, and integration of AI into products like advertising and the metaverse ensured that, unlike its tech competitors, it was able to withstand the global sell-off in tech stocks,” wrote Kate Leaman, chief market analyst at AvaTrade, after the stock gained 1.9% on 27 January.

Microsoft

Microsoft delivered an earnings beat on 29 January, but saw its share price fall 6.2% the following session regardless.

Microsoft is particularly vulnerable to DeepSeek’s potential disruptive influence, as a major investor in OpenAI. Its Azure cloud business could also be disrupted by lower-compute AI, and as in the case of Alphabet and Amazon, this was a concern for investors with the division’s growth having weakened in the previous quarter.

Microsoft shares are down 10.1% over the past six months, and 9.7% so far this year.

Nvidia

Nvidia is, on the face of it, the Magnificent Seven stock with the most to lose from DeepSeek’s emergence and the broader tech selloff, as the flagship stock of the AI boom.

Nvidia’s 27 January decline, following DeepSeek’s emergence, wiped nearly $600 billion off its share price, the largest single-day market cap decline in stock market history. Nvidia’s shares are down 7.0% over the past six months and 19.0% in the year to date.

Nvidia’s Q4 earnings release saw the shares bounce in post-market trading, but fall back substantially the following session, as investors were underwhelmed by its forward guidance in light of the potential DeepSeek disruption.

Tesla

On top of the headwinds facing the other Magnificent Seven stocks, Tesla is also contending with the association between its CEO, Elon Musk, and the Trump administration.

Tesla sales have plummeted in Europe as the brand faces a backlash against the US administration’s seemingly hostile stance towards the continent.

As the stock has continued to be sold off, Trump himself felt the need to intervene in Musk’s favour, going as far as to buy a Model S from the company and urging his followers on Truth Social to do the same.

Despite Trump’s efforts, Tesla shares have fallen 42.9% so far this year, and are up just 1.1% over the past six months, despite a massive boost from Trump’s election win during that period.

Tesla bulls, though, still hope that the business will come good as and when it launches the robotaxi business that Musk has long promised.

Are the Magnificent Seven a good investment?

Given all that, should you buy the Mag7 stocks?

The answer of course depends on your personal circumstances, investment goals, and risk appetite, but before investing in big tech stocks it is worth remembering that their oversaturation in the stock market and strained valuations mean that they are relatively risky investments, despite the fact that they are big, established and highly profitable businesses.

“Investing in the Magnificent Seven requires taking a view on what could go right and what could go wrong with each company,” says Coatsworth. “You then need to look at valuations and whether they’re expensive, fair or cheap compared with the growth on offer and factoring in the potential rewards and risks.”

Sources: *Wall Street analyst estimates via stockanalysis.com as of 11 March 2025, ^Birinyi Associates analysis via Wall Street Journal as of 28 February 2025

Based on their price to earnings ratios alone, Alphabet is the cheapest Mag7 stock at present; it’s actually cheaper than the S&P 500 average based on both trailing and expected earnings.

Despite its share price drop this year, Tesla is the most expensive of the group compared to its trailing and projected earnings.

The argument in favour of buying Mag7 tech stocks is that their projected revenue and earnings growth are superior to the broader market. To reiterate, though, these expectations are baked into their prices already.

That means that these companies have to post very big, positive surprises in order to see share price gains.

“Each company needs to show it is capable of sustaining growth in sales and profits and that margins are consistent or growing,” says Coatsworth, “otherwise, they might find it hard to keep investors on side.”