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Special Report How the Mag 7's 2025 Laggards Could Turn Into 2026 WinnersSubmitted by Jordan Chussler. Posted: 12/31/2025. 
Key Points - 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 more mixed outcome. Apple (NASDAQ: AAPL), for example, finished the year up under 12%, trailing the S&P 500's 2025 gain 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 just over 16%, about 10%, and under 5%, respectively. Those aren't the returns investors expect when paying for the record valuations of a handful of companies that dominate index weightings. However, looking ahead to 2026, there are plenty of reasons to believe those four laggards could again outperform the S&P 500. AI CapEx Hindered the Magnificent 7's Growth Last Year That 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 returns of nearly 21%, 36%, and 66%, respectively. For the other four stocks in the cohort, performance diverged notably. Much of that reflected record-high valuations, concentrated market positions and ongoing concerns about an AI bubble. More specifically, AI—and the elevated capital expenditures (CapEx) tied to those firms' AI ambitions—was the primary culprit behind softer returns. Amazon's underperformance can be partially attributed to its AI infrastructure spending, which was a large component of the roughly $400 billion Big Tech shelled out for chips, data centers, and storage solutions in 2025. For the Jeff Bezos-founded firm, that figure amounted to 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 that will serve Amazon Web Services (AWS). That spending 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. While Apple has been criticized for underspending on AI, the company plans to scale up AI CapEx in the year ahead to remain competitive. Microsoft and Meta have already spent large sums on Azure, Copilot and Meta AI—investments that have also pressured their near-term 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 several initiatives to offset heavy AI CapEx. Amazon is positioning itself as a potential grocery disruptor and plans to expand its robotics program, a push the company says could replace as many as 600,000 roles and materially reduce payroll costs. At the same time, AWS remains the world's largest cloud provider with roughly 31% of global market share. From Q3 2021 to Q3 2025, AWS revenue rose from $16.11 billion to $33.01 billion—a nearly 105% increase. The company hasn't missed earnings expectations since Q4 2022, putting together 11 consecutive beats. Analysts are bullish on AMZN for 2026: 58 of 61 analysts covering the stock assign it a Buy rating, and the average 12-month price target implies roughly 27.4% potential upside. Apple's Stock Buybacks Signal Positive Expectations Although Apple hasn't committed as much to AI CapEx yet, it plans to increase spending to stay competitive. Meanwhile, the iPhone maker's $185.65 billion in stock buybacks in 2025 helped boost shareholder value by reducing the float and increasing earnings per share (EPS). Despite heightened volatility over the past 12 months, institutional investors poured roughly $316 billion into AAPL, outweighing $174 billion in outflows. The company has beat earnings expectations every quarter since Q1 2023, and quarterly net income rose more than 86% between Q4 2024 and Q4 2025, from $14.7 billion to $27.4 billion. Another factor in Apple's 2025 underperformance was tariff uncertainty, which hit its China and India businesses. With more clarity around trade policy, the impact of those issues on AAPL should lessen going forward. Meta Has Wall Street on Its Side Meta's AI spending drove net income down 87%, from $20.8 billion in Q4 2024 to $2.7 billion in Q3 2025. Still, Wall Street's confidence remains intact. Of 50 analysts covering META, 43 assign it a Buy rating. Their average 12-month price target implies more than 23% potential upside, and institutional ownership sits at nearly 80%. Analysts expect Meta's AI investments to pay off: broader adoption of tools like Advantage+ should improve ad efficiency and drive growth in sales and impressions. Expanded monetization of WhatsApp and Threads, along with new AI models (for example, Avocado), are additional catalysts despite short-term margin pressure. Microsoft Is Seeing More Copilot Adoption Microsoft's Azure trails only Amazon's AWS in cloud market share, commanding roughly 20%–22% of the global market—an important driver of top-line growth. Azure helped produce a 40% revenue increase in Q1 2026. For the Bill Gates–founded firm, a key 2026 tailwind will be 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. Accordingly, 39 of 43 analysts covering MSFT assign it a Buy rating, and the average 12-month price target suggests more than 29% potential upside.
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