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How the Mag 7's 2025 Laggards Could Turn Into 2026 Winners
By Jordan Chussler. First Published: 12/31/2025.
Quick Look
- 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, the results were 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 gain of 17.49%.
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Claim your free copy of How To Master The Retirement Trade nowShareholders of Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META), and Amazon (NASDAQ: AMZN) saw more modest gains of just over 16%, about 10%, and less than 5%, respectively.
Those aren't the returns investors expect when paying up for the record valuations concentrated in a handful of names. Looking ahead to 2026, however, there are several 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 outpaced the S&P 500 in 2025. Tesla (NASDAQ: TSLA), NVIDIA (NASDAQ: NVDA), and Alphabet (NASDAQ: GOOGL) produced index-beating returns of nearly 21%, 36%, and 66%, respectively.
For the other four stocks in the cohort, performances diverged notably. Much of that reflected record-high valuations, market-concentration concerns, and ongoing debate about an AI bubble.
But the dominant factor was AI — specifically, the elevated capital expenditures (CapEx) companies committed to pursue their AI strategies.
Amazon's underperformance can be traced in part to its AI infrastructure spending, which was a major component of the roughly $400 billion Big Tech spent on chips, data centers, and storage services in 2025.
For Jeff Bezos's firm, that CapEx reached 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).
That heavy 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.
Apple, by contrast, has been criticized for underspending on AI, but it plans to ramp up AI CapEx in 2026 to close the gap with Microsoft and Meta, both of which spent heavily on Azure, Copilot, and Meta AI — investments that have also weighed on their near-term results.
Amazon's Business Diversification and Robotics
Since hitting its all-time high on Nov. 3, 2025, AMZN is down nearly 9%. The company is, however, pursuing several initiatives to offset its AI-related spending.
Amazon is positioning itself as a potential grocery disruptor and plans to expand its robotics program, an effort that could automate tasks currently performed by up to 600,000 workers 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 grew from $16.11 billion to $33.01 billion — an increase of about 105%.
The company hasn't missed earnings expectations since Q4 2022, delivering 11 consecutive beats. Analysts are generally bullish on AMZN for 2026: 58 of 61 covering analysts 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
Apple hasn't committed as much to AI CapEx yet, but it is planning to increase that spending to remain competitive. Meanwhile, the company's $185.65 billion in stock buybacks in 2025 reduced the share count and helped lift earnings per share (EPS), which is a direct way to increase shareholder value.
Institutional investors were net buyers of AAPL over the past 12 months, with about $316 billion in inflows versus $174 billion in outflows from other investor groups, helping stabilize the stock amid retail volatility.
Apple has beaten 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.
Tariff uncertainty was another headwind for Apple in 2025, particularly for its China and India operations. With more clarity on trade policy, the Trump administration's trade stance should have a reduced impact on AAPL going forward.
Meta Has Wall Street on Its Side
Heavy AI investment hit Meta's net income, which fell about 87% from $20.8 billion in Q4 2024 to $2.7 billion in Q3 2025. Still, 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% potential upside, and institutional ownership sits near 80%.
Analysts expect Meta's AI investments to pay off through better ad efficiency from tools like Advantage+, expanded monetization of WhatsApp and Threads, and new AI models (for example, Avocado). Those developments should drive sales and impressions growth even if they weigh on near-term margins.
Microsoft Is Seeing More Copilot Adoption
Microsoft's Azure trails only AWS in cloud market share, commanding roughly 20%–22% of the global market, and it remains the company's primary growth engine. That helped drive a 40% revenue increase in Q1 2026.
But Microsoft's key 2026 tailwind is likely broader 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-driven cloud adoption could add up to $25 billion to Microsoft's revenue by the end of FY 2026. Reflecting that optimism, 39 of the 43 analysts covering MSFT assign it a Buy rating, and the average 12-month price target implies more than 29% potential upside.
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