Against a backdrop of heightened geopolitical tensions and declining market risk appetite, the group of seven major U.S. technology stocks has collectively entered a technical correction zone. On Friday, the index tracking these companies closed more than 10% below its record high set last October, reaching the level typically defined as a "correction" by market standards. Data shows the index fell 1.6% on Friday, following a 1.9% decline the previous day. Over recent weeks, the index had repeatedly dipped below the correction threshold during intraday trading, but it wasn't until this Friday that it officially confirmed a technical correction at the close. This movement signals a notable cooling of the core force that has driven U.S. stock gains in recent years. Fueled by the artificial intelligence investment boom, these tech giants were once viewed as early beneficiaries and served as the primary drivers of the S&P 500 bull market. Data indicates the seven-stock index surged 107% in 2023, 67% in 2024, and 25% in 2025. However, since the start of 2026, share prices of all seven companies have declined. The "Magnificent Seven" refers to the seven tech giants: Alphabet, NVIDIA, Meta Platforms, Apple, Amazon.com, Tesla Motors, and Microsoft. So far this year, investments in all seven companies have yielded negative returns. Market observers point out that investors are beginning to question the return prospects of AI-related investments. Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, noted that many investors are reassessing the massive capital expenditures tech firms are making in AI. "Investors are starting to question whether companies are pouring money into AI at such a high rate without a clear near-term path to profitability, which seems more like a defensive move against potential competitors," she said. "Momentum investors typically prefer assets that are consistently rising." As investors begin demanding tangible returns from AI investments, the appeal of large tech companies has diminished. At the same time, markets are concerned that new AI tools could disrupt industries such as software. Among the seven giants, Microsoft has shown the weakest performance this year, with its stock price down more than 18% year-to-date. Although the price declines have lowered these companies' valuations, their overall valuation remains above the broader market average. Amid rising geopolitical risks and heightened market volatility, some investors are reducing exposure to high-risk assets and increasing holdings in perceived safe-haven sectors, such as energy and utilities. Additionally, the war between the U.S. and Iran, along with surging oil prices, has exerted pressure on the overall U.S. stock market. However, some investors believe large-cap tech stocks still possess certain "safe-haven qualities." They argue that these companies boast strong earnings growth, solid balance sheets, and limited exposure to commodity price risks, suggesting the current price correction may present a buying opportunity. Robert Edwards, Chief Investment Officer at Edwards Asset Management, stated that the earnings yield of large tech companies is, in some ways, comparable to U.S. Treasury yields, making them attractive to investors seeking stable returns. "From a valuation perspective, large tech stocks still offer reasonable prices and genuine growth potential. AI is not just hype; these companies are likely to generate cash flow from their AI investments within a reasonable timeframe, even though capital expenditure levels are indeed very high."
Comments