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Special Report How the Mag 7's 2025 Laggards Could Turn Into 2026 WinnersReported by Jordan Chussler. Article Posted: 12/31/2025. 
In Brief - While the broad tech sector once again outperformed the S&P 500 in 2025, a handful of the Magnificent Seven stocks failed to live up to their hype.
- NVIDIA, Apple, Meta Platforms, and Microsoft all trailed the benchmark index’s 17% gain last year.
- While those firms’ enormous AI CapEx is likely to increase, there are plenty of reasons to believe those four stocks will once again outperform in the year ahead.
Tech stocks had another strong showing in 2025, finishing second among the S&P 500’s 11 sectors for the second consecutive year. But for investors who piled into the mega-cap Magnificent Seven stocks, it was a mixed bag. Apple (NASDAQ: AAPL), for example, finished the year with a gain of less than 12%, trailing the S&P 500’s 2025 return of 17.49%. Imagine a bull market so powerful, every single investor became a millionaire. Not by finding the next NVIDIA or Bitcoin, but by owning a simple index fund.
It sounds impossible. Yet it happened – just a short time ago. Now a legendary figure says: "Brace yourselves. It's about to happen here, in America. But fair warning – it could be the worst thing that ever happens to you."
This story has received little coverage in the press. But if history repeats, it could bump tens of millions of Americans into a 7-figure net worth practically overnight. Click here for the full story. Shareholders of Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META), and Amazon (NASDAQ: AMZN) saw modest gains of roughly 16%, 10%, and under 5%, respectively. Those aren’t the returns investors expect when paying up for record valuations in a handful of companies that heavily influence index weightings. But looking ahead to 2026, there are reasons to believe these four laggards could once again outperform the S&P 500. AI CapEx Hindered the Magnificent 7’s Growth Last Year The underperformance wasn’t uniform. Three of the Magnificent Seven stocks outpaced the S&P 500 in 2025. Tesla (NASDAQ: TSLA), NVIDIA (NASDAQ: NVDA), and Alphabet (NASDAQ: GOOGL) delivered index-beating performances of nearly 21%, 36%, and 66%, respectively. For the other four stocks in the group, results diverged. Much of that was driven by record-high valuations and concerns about market concentration and an AI bubble. More specifically, AI-related capital expenditures (CapEx) were a primary culprit. Large investments in chips, data centers and storage in 2025 weighed on near-term earnings for several of these firms. Amazon’s underperformance can be partly attributed to AI infrastructure spending, which was a big slice of the roughly $400 billion Big Tech spent on chips, data centers and storage in 2025. For Amazon, that figure was about $125 billion last year, including $11 billion for a 1,200-acre data center in Indiana and $10 billion for a 20-building project in North Carolina’s Research Triangle to support Amazon Web Services (AWS). Those investments eroded the company’s free cash flow, which fell from $3.6 billion in Q4 2024 to -$12.4 billion and -$8.4 billion in the first two quarters of 2025. And while Apple has been criticized for underspending on AI, the company plans to ramp up AI CapEx to remain competitive, helping it catch up to Microsoft and Meta, which have already invested heavily in Azure, Copilot and Meta AI — investments that have also pressured their bottom lines. Amazon’s Business Diversification and Robotics Since hitting its all-time high on Nov. 3, 2025, AMZN is down nearly 9%. The company is pursuing other initiatives to offset its large AI CapEx. Amazon is positioning itself as a potential grocery disruptor and intends to expand its robotics program, a push that could automate roles across the company and significantly reduce payroll costs. At the same time, AWS remains the world’s largest cloud provider with roughly 31% global market share. From Q3 2021 to Q3 2025, AWS revenue rose from $16.11 billion to $33.01 billion — nearly a 105% increase. The company hasn’t missed earnings expectations since Q4 2022, recording 11 consecutive beats. Analysts are generally bullish on AMZN for 2026: 58 of 61 covering the stock rate it Buy, and the average 12-month price target implies about 27.43% upside. Apple’s Stock Buybacks Signal Positive Expectations Apple hasn’t committed as much to AI CapEx yet, but it plans to increase spending to stay competitive. Meanwhile, the iPhone maker repurchased $185.65 billion in stock in 2025, which reduces the share count and helps boost earnings per share (EPS). While retail traders experienced heightened volatility over the past 12 months, institutional investors poured money into AAPL to the tune of $316 billion versus $174 billion in outflows. The company has beat earnings expectations every quarter since Q1 2023, and quarterly net income grew more than 86% between Q4 2024 and Q4 2025, from $14.7 billion to $27.4 billion. Another factor in Apple’s relative underperformance in 2025 was tariff uncertainty, which affected its China and India operations. With more clarity around trade policy, the Trump administration’s trade actions should have a reduced impact on AAPL going forward. Meta Has Wall Street on Its Side Heavy AI spending hit Meta’s net income, which fell about 87% from $20.8 billion in Q4 2024 to $2.7 billion by Q3 2025. Even so, Wall Street remains largely supportive. Of the 50 analysts covering META, 43 assign it a Buy rating. Their average 12-month price target implies more than 23% upside, and institutional ownership sits near 80%. Analysts expect Meta’s AI investments to pay off: broader adoption of AI tools like Advantage+ should improve ad efficiency and drive growth in sales and impressions. Expanded monetization of WhatsApp and Threads, together with new AI models (for example, Avocado), are seen as potential catalysts despite near-term margin pressure. Microsoft Is Seeing More Copilot Adoption Microsoft’s Azure trails only Amazon’s AWS in the cloud market, commanding roughly 20%–22% of global share, and will remain a key driver of top-line growth. Azure helped fuel a 40% revenue increase in Q1 2026. For the Bill Gates–cofounded firm, 2026’s primary tailwind is likely growing adoption of Copilot. The AI-powered assistant, integrated across Windows and Microsoft 365, is now used by more than 90% of Fortune 500 companies. Analysts estimate AI cloud adoption could add up to $25 billion to Microsoft’s revenue by the end of FY 2026. Reflecting that, 39 of 43 analysts covering MSFT assign it a Buy rating, with an average 12-month price target implying more than 29% upside.
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