As the artificial intelligence boom enters a new phase, individual investors in the United States are moving capital away from the dominant "Magnificent Seven" technology giants and redirecting it towards smaller and mid-sized companies within the AI infrastructure sector, such as chipmakers, data center operators, and power equipment suppliers. Data on capital flows indicates this trend has accelerated noticeably in recent times.
According to Vanda Research, since July, retail investors have made net purchases of approximately $52 million in Microsoft stock, the highest among the "Magnificent Seven." However, over the same period, Intel saw net purchases of $194 million, and AI cloud service provider IREN saw net purchases of $56 million. Brett Kenwell, an investment analyst at eToro, noted that while the "Magnificent Seven" have been market darlings for years, individual investors are now "following the money" toward newer opportunities. Data from Citadel Securities also shows that retail trading activity surged in May and June, with average daily volumes reaching more than double the 2024 average.
A prime example of this shift in investment strategy is Alex Cardona, a 50-year-old software company executive. He stated he has allocated some funds to AI infrastructure firms like data center operator Equinix and semiconductor company Marvell Technology, while maintaining only small positions in the "Magnificent Seven." Marvell Technology has surged over 120% this year, making it the best performer in his portfolio. Cardona expressed a desire to "own the infrastructure needed to run AI," focusing on companies deeply embedded in the AI supply chain that may not be household names.
Performance among the "Magnificent Seven" has diverged significantly this year. With the exception of two members, the group has underperformed the broader market: Microsoft is down 19% year-to-date, the worst performer among the seven, while Apple leads with a 23% gain. These six stocks collectively account for 36% of the S&P 500's total market capitalization, but the net buying momentum from retail investors for this group has slowed markedly.
As market focus pivots towards AI infrastructure and related sectors, risks are also accumulating. On July 17th, the Philadelphia Semiconductor Index fell 1.6%, drawing market attention as it entered bear market territory—having declined more than 20% from a recent peak. Jonathan Kofsky, a portfolio manager at Janus Henderson's Global Technology and Innovation team, commented that the market is seeking more evidence that AI is driving revenue growth or productivity gains. To justify the current high levels of capital expenditure, the returns from AI need to benefit the broader economy.
Some retail investors are choosing to extend their reach further into emerging thematic areas. Davis Cantrell, a 19-year-old university student, recently reduced his position in Microsoft and exited his holding in NVIDIA, shifting capital towards the space and quantum computing sectors. He believes large technology companies remain decent investments, but that "the best days are behind them," and he is now searching for more aggressive, high-growth stocks.
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