If the artificial-intelligence boom is a gold rush, Alex Cardona wants to start digging outside the usual spots.
That's the strategy the 50-year-old director at a software company had in mind when he dedicated a chunk of his portfolio to investing in AI infrastructure firms such as data-center operator Equinix and semiconductor company Marvell Technology.
Not especially high on his list? Members of the Magnificent Seven, the megacap tech stocks that once dominated market gains. Cardona holds only a small sliver of those companies, he said, and would prefer to put his dollars to work elsewhere.
"With a pure play, I can go after something like Marvell -- those smaller companies that maybe a lot of people haven't heard of," he said. The chip maker is his portfolio's top performer, up more than 120% this year. "My hope is to own the infrastructure that AI has to run on."
Individual investors' yearslong love affair with the market's biggest tech stocks is starting to cool off. Retail traders are buying fewer shares of Microsoft, Apple, Amazon.com, Meta, Nvidia, Alphabet and Tesla. Instead, they are flocking to newer AI trades: chip stocks like SK Hynix, for example, or the Roundhill Memory exchange-traded fund, according to data from flow-tracking firm Vanda Research.
That reflects a broader shift in the market in which the group of seven market-leading tech giants have at least temporarily ceded the spotlight to chip makers, memory suppliers and some small and midsize shares linked to the AI build-out. All but two members of the Magnificent Seven have trailed the broader market this year: Microsoft is the biggest laggard, down 19% year to date, while Apple leads with a 23% gain.
The risks of chasing rapid gains elsewhere became evident on Friday, after news of a new model from China's Moonshot AI spooked Wall Street. Tech shares of all stripes stumbled, and AI infrastructure plays were among the hardest-hit: The PHLX Semiconductor Index dropped 1.6%, putting the index in bear-market territory, down more than 20% from its recent high.
Like Cardona, many individual investors maintain significant exposure to the Mag Seven, which make up a combined 36% of the S&P 500's market value. But they are increasingly funneling dollars toward less famous stocks that they are hoping will emerge as the next set of AI superstars.
"Retail aren't buying the Mag 7 anymore. They're picking winners," Vanda analysts wrote in a note last week. "They're buying the stories they have the highest conviction in."
Individual investors have bought a net $52 million of Microsoft shares in July so far, Vanda's data show, making it the most popular Mag Seven member. Compare that to the $194 million they have plugged into Intel, and the $56 million toward the AI cloud company IREN.
For years, ordinary investors were the Mag Seven's most loyal and enthusiastic fans, plowing into the stocks through the early days of the AI race, the DeepSeek scare of early 2025 and the tariff turmoil that rattled Wall Street last spring.
But the members of the group have since headed in very different directions. In recent months, individual traders turned their attention away from the trillion-dollar firms funding the AI build-out and toward those making the chips, cooling systems and electric power it requires.
"The Mag Seven for years were the market darlings," said Bret Kenwell, U.S. investment analyst at eToro. Now, he said, individual investors are "following the money, figuratively and literally."
That's not to say that individual traders are backing away from markets. Retail activity surged to new records in May and June, according to Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities. Average daily stock-trading volumes during those months were more than double the 2024 average.
Even before Friday's drop, the momentum of the AI boom had hit a lull on Wall Street. The semiconductor rally, once red-hot, had chilled. Major U.S. indexes were trading sideways in a typical summer slowdown. Investors were looking ahead to second-quarter earnings reports -- with their eyes peeled for evidence that the returns on AI investments would start to show up on corporate balance sheets.
"The market is looking for more signs of AI driving revenue growth or driving productivity gains," said Jonathan Cofsky, portfolio manager on the global technology and innovation team at Janus Henderson. "To continue supporting that level of spend, you need the returns to be pervasive throughout the economy."
AI stocks of all kinds are ultimately subject to similar concerns. On Friday, shares of small-cap chip makers, software companies and the Mag Seven all fell in tandem.
For some traders, the potential payoff is worth the risk. Davis Cantrell, a college student based near Atlanta, has been investing for roughly two years and closely following the biggest AI players over that period.
But recently, the 19-year-old trimmed his Microsoft holdings, sold all of his Nvidia shares and rotated the funds into a few corners of the market that he finds more promising: space and quantum computing, two industries he thinks are poised to skyrocket as the AI revolution takes hold.
The big tech names are still decent investments, Cantrell said. But the best part of that party is over.
"I'm looking for aggressive, more high-risk growth stocks," he said. "I just don't see Microsoft and Nvidia fitting into that category anymore."
Write to Hannah Erin Lang at hannaherin.lang@wsj.com
(END) Dow Jones Newswires
July 19, 2026 21:00 ET (01:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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