Magnificent Seven Meltdown: Microsoft and Amazon Lead Tech Sell-Off

TLDR

• Amazon and Microsoft stocks have fallen more than 20% from their peaks, officially entering bear market status as investors worry about AI infrastructure costs.
• The Magnificent Seven tech ETF dropped nearly 11% from its October high as money shifts to other market sectors.
• Apple shares tumbled 5% Thursday following news that Siri’s AI enhancement could be postponed beyond initial timelines.
• Meta gave back all its post-earnings rally gains while Alphabet declined 6.4% in the last month despite strong cloud performance.
• Wall Street analysts cut their outlook on tech stocks, warning that massive AI spending isn’t producing enough short-term revenue to justify valuations.

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The biggest technology stocks on Wall Street are facing a sharp reversal. The Roundhill Magnificent Seven ETF has dropped nearly 11% from its October peak as investors question whether massive artificial intelligence investments will pay off.

Amazon and Microsoft lead the decline among major tech companies. Both stocks have fallen more than 20% from their recent highs, meeting the definition of a bear market. Shareholders are concerned that billions spent building AI infrastructure hasn’t translated to enough cloud computing revenue growth.

The weakness has spread across the entire group of mega-cap technology stocks. Alphabet dropped 6.4% over the past month despite positive reviews of its Gemini AI system. Meta Platforms lost all the gains it made after reporting earnings that showed AI boosting its business.

Apple Struggles with AI Timeline

Apple recorded its worst trading day since April 2025, losing 5% of its value Thursday. News reports suggested the company would delay its artificial intelligence upgrade for Siri. Investors are watching closely to see if new AI tools will convince customers to upgrade their iPhones.

The iPhone maker also deals with higher costs for memory chips. These rising expenses come while the company works to launch AI features that can compete with rivals.

Investment Firms Turn Cautious

UBS changed its rating on U.S. technology stocks to Neutral from a previous buy recommendation. Mark Haefele, the firm’s chief investment officer for global wealth management, told clients to spread investments across different industries and countries. He wrote that AI benefits aren’t limited to tech companies.

Mark Hawtin from Liontrust Asset Management pointed out the growing capital spending across all seven companies. He used Amazon as an example, explaining that rising AI infrastructure costs could eat up most of the cash the company generates this year.

Nvidia stock has moved sideways for months without gaining ground. Tesla dropped 7.3% so far this year, though its movement depends more on CEO Elon Musk’s plans for self-driving taxis and robots than AI trends.

Market Impact and Outlook

When these seven stocks fall together, it usually means investors are pulling back from concentrated bets. The Magnificent Seven companies powered most of the stock market’s gains over the last two years. Their decline now drags down major indexes.

The selloff isn’t about weak profits. Companies are reporting solid earnings. Instead, investors worry about future growth and whether AI technology will generate profits fast enough to justify current spending levels.

Analysts believe Microsoft has the most room for gains among the group. Wall Street’s average price target for Microsoft sits at $593.38 per share, suggesting 47.7% potential upside from current prices.

The tech sector rotation shows investors want proof that AI investments will deliver returns. Companies continue spending heavily on data centers and computing power while revenue from AI products remains small compared to the capital going out the door.

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