TLDR

  • Shares of Amazon and Microsoft have dropped over 20% from their recent highs, formally entering bear market territory amid investor concerns about AI infrastructure expenses.
  • The Magnificent Seven tech ETF has slid nearly 11% from its October peak as capital moves to other market sectors.
  • Apple’s stock fell 5% on Thursday after reports indicated that the AI upgrade for Siri might be delayed beyond its original schedule.
  • Meta has erased all the gains from its post-earnings surge, while Alphabet saw a 6.4% decline over the past month, even with robust cloud performance.
  • Wall Street analysts have downgraded their tech stock outlooks, cautioning that heavy AI investments aren’t yielding sufficient near-term revenue to support current valuations.

Wall Street’s largest tech stocks are experiencing a steep downturn. The Roundhill Magnificent Seven ETF has declined nearly 11% from its October high as investors doubt whether massive artificial intelligence investments will deliver returns.

Amazon and Microsoft are leading the decline among major tech firms. Both equities have dropped over 20% from their recent highs, fulfilling the criteria for a bear market. Shareholders are worried that billions invested in AI infrastructure haven’t translated into adequate growth in cloud computing revenue.

This weakness has extended across the entire cohort of mega-cap tech stocks. Alphabet fell 6.4% in the past month, even with favorable reviews of its Gemini AI system. Meta Platforms has lost all the gains it made following earnings reports that highlighted AI driving its business.

Apple Struggles with AI Timeline

Apple saw its worst trading day since April 2025, with its stock losing 5% of its value on Thursday. News reports suggested the company would delay the artificial intelligence upgrade for Siri. Investors are closely monitoring whether new AI tools will persuade customers to upgrade their iPhones.

The iPhone manufacturer is also grappling with increased memory chip costs. These rising expenditures occur as the company works to roll out AI features that can compete with those of its rivals.

Investment Firms Turn Cautious

UBS has revised its rating on U.S. tech stocks from Buy to Neutral. Mark Haefele, the firm’s chief investment officer for global wealth management, advised clients to diversify investments across various industries and countries, noting that AI benefits aren’t confined to tech firms.

Mark Hawtin of Liontrust Asset Management highlighted the increasing capital expenditures across all seven companies. Using Amazon as an example, he explained that rising AI infrastructure costs could consume a large portion of the company’s cash generated this year.

stock has moved sideways for months without gaining ground. Tesla has declined 7.3% year-to-date, though its performance is more tied to CEO Elon Musk’s plans for self-driving taxis and robots than AI trends.

Market Impact and Outlook

When these seven stocks decline in tandem, it typically signals investors are reducing concentrated positions. The Magnificent Seven companies drove much of the stock market’s gains over the past two years; their current decline is now weighing on major indices.

This selloff isn’t due to weak profits—companies are reporting strong earnings. Rather, investors are concerned about future growth and whether AI technology will generate profits quickly enough to warrant current spending levels.

Analysts consider Microsoft to have the most upside potential within the group. Wall Street’s average price target for Microsoft stands at $593.38 per share, indicating a 47.7% potential increase from current levels.

The rotation out of tech indicates investors are seeking evidence that AI investments will yield returns. Companies continue to spend heavily on data centers and computing power, yet revenue from AI products remains minimal relative to the capital being invested.