'Is the Magnificent Seven over?' $2tr wiped out — but 'even the railway bubble changed the world'

The "Magnificent Seven" — Microsoft, Apple, Nvidia, Google, Amazon, Meta and Tesla — the group of tech giants that led the AI boom and powered US equity markets, is losing its grip. Yet even as some analysts declare the M7 era over, others argue that AI itself cannot be dismissed as a simple bubble.

Financial Times columnist John Plender said Saturday that the M7, which once dominated US markets, shed nearly $2 trillion in market capitalization in June alone, as investor concern mounted that revenue generation from AI infrastructure spending may fall short of expectations.

Plender said major hyperscalers — Microsoft, Amazon, Alphabet and Meta — are planning capital expenditure exceeding $1 trillion between 2025 and 2026, but are funding investment that outstrips earnings and cash flow through debt, while rising prices for key components such as memory chips are squeezing profitability further.

Recent market dynamics have also shifted from earlier patterns.

Plender noted that after the M7's sharp share price declines, the stocks no longer move in the same direction, citing Citigroup analysts who concluded that "the M7 is now a dead concept as an analytical framework for gauging large-cap growth drivers."

He attributed the shift to a combination of factors: a rotation from value-oriented investing toward momentum-driven strategies, and a concentration of flows into large-cap technology stocks through passive and index funds.

Plender warned that many hedge funds and mutual funds are currently buying chipmakers while shorting hyperscalers — a positioning that could amplify volatility sharply if market conditions reverse.

He noted that the phenomenon of a handful of large technology stocks dominating the market is not new.

In the early 2010s, the FAANG group — Facebook, Apple, Amazon, Netflix and Google — led markets, and before that, the "Nifty Fifty" were the blue-chip darlings of the 1960s. Yet companies that were once part of the Nifty Fifty — Avon, Polaroid, Kodak and Xerox among them — later lost their competitive edge and faded.

Still, Plender said the current AI boom should not be written off as mere speculative excess.

Citing a recent Bank for International Settlements report, he said "unlike past general-purpose technologies, AI can augment the production of knowledge itself," and assessed that AI could ultimately prove to be a "productive bubble" over the long term.

He pointed to the British railway bubble of the 1840s as a prime example. Far more lines were built than the market needed — six routes were laid between Leeds and Manchester when one or two would have sufficed — and the bubble eventually burst. But the railway infrastructure built in the process became a cornerstone of the Industrial Revolution and subsequent economic growth.

The argument is that even when early-stage inefficiency and overinvestment are unavoidable, the underlying infrastructure can ultimately raise productivity and drive innovation across the broader economy.

Plender said the same concentration of AI investment is visible in the Korean market as well.

He said single-stock ETFs tracking Samsung Electronics and SK Hynix are amplifying volatility in both shares, and that given their heavy weighting in the index, the two stocks' movements have come to dictate the direction of the Kospi as a whole. He also noted that the South Korean government has halted new listings of leveraged single-stock ETFs and tripled the minimum deposit requirement.

As a closing investment recommendation, Plender advocated diversification across countries and asset classes, along with maintaining a meaningful cash allocation. He also noted that markets are already discussing a new AI bellwether grouping to replace the M7 — dubbed "MANGOS," for Meta, Anthropic, Nvidia, Google, OpenAI and SpaceX.

Experts caution, however, that the growth potential of the AI industry and the investment merits of individual companies need to be assessed separately. While AI technology is likely to continue reshaping industries broadly, the companies that actually benefit will keep shifting with market conditions, competitive dynamics and profitability — making a long-term investment strategy more important than concentrating on any single stock or theme.