In the spirit of end-of-year round-ups, it is worth scrutinising the fortunes of the so-called Magnificent Seven: Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla and their dominance of global equity markets, which shows no signs of abating.
Yet 2025 was a year that highlighted both the extraordinary influence and the vulnerabilities of these mega-cap tech companies.
Collectively, they now account for more than a third of the S&P 500, and the market’s performance has increasingly hinged on the trajectory of their AI ambitions.
Returns and the weight of AI
While Tesla, Nvidia, and Alphabet delivered standout gains, 28 per cent, 36 per cent, and 66 per cent, respectively, Apple, Microsoft, Meta, and Amazon lagged behind the S&P 500’s 17 per cent advance.
Nvidia’s performance deserves particular attention. The company benefited from both AI hardware demand and investor confidence in its long-term positioning as the world’s leading AI chipmaker.
Sales of its data centre GPUs surged, driven by contracts with OpenAI, cloud providers, and enterprise clients investing heavily in large language models.
“There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different,” Nvidia boss Jensen Huang said in response to market scepticism about the sector’s fundamentals.
Despite regulatory and export-related headwinds in China, Nvidia’s stock rose around 36 per cent in 2025, outpacing the index and solidifying its role as a linchpin in the AI ecosystem.
Amazon, by contrast, managed just 5.5 per cent, undermined by heavy investment in AI infrastructure.
Its $125bn AI capex, spanning a 1,200-acre Indiana data centre and a 20-building complex in North Carolina, contributed to a decline in free cash flow from $3.6bn in late 2024 to negative $8.4bn in early 2025.
Apple’s underperformance, by contrast, owed as much to geopolitical uncertainty as to AI spending.
Tariff concerns weighed on production in China and India, while the company also opted for a measured approach to AI investment.
Microsoft and Meta, meanwhile, saw profits temporarily compressed by extensive spending on Azure, Copilot, and Meta AI, though both remain positioned to benefit from adoption in 2026.
The flurry of AI investment in 2025 became both a growth engine and a capital drain.
Investment in chips, cloud infrastructure, and data centres is unprecedented, but the translation into tangible profits remains uneven.
A recent report found that only 15 per cent of businesses report measurable returns from AI applications. Yet, the data centre expansion continues at a pace that suggests a ‘build it and they will come’ mentality.
The Mag 7 in 2026
For UK investors, the 2026 outlook will be shaped by the performance and valuation dynamics of the US market’s largest tech conglomerates.
The FTSE 100’s minimal exposure to technology, just around two per cent of the index, means that success or stress among the Magnificent Seven will not translate directly into UK performance.
But the trickle-down effects are unavoidable.
As US mega‑caps continue to command a disproportionate share of global equity returns, UK institutional investors have already begun adjusting allocations.
Meanwhile, the Bank of England’s financial policy committee has warned that high valuations in US tech stocks could portend broader instability.
“American stock indices have become heavily concentrated around a few major tech firms, significantly boosting systemic risk should investor confidence in AI waver,” the Bank noted, highlighting the potential for an AI‑led correction to ripple through global markets and affect UK portfolios.
Domestically, this could reinforce the FTSE’s defensive tilt, as investors may see utilities, consumer staples, and dividend‑paying businesses continuing to attract capital from investors wary of a US-dominated tech bubble.
If corporate earnings in the UK remain stable while tech valuations falter, UK equities may benefit through a rebalancing of global capital allocations, even if the FTSE itself has limited direct tech exposure.
Nevertheless, if AI‑driven growth in the US sustains another year of strong earnings momentum, corresponding demand for growth assets could buoy UK exporters and domestically global companies.