Magnificent 7 Tech Stocks Plunge Over $700 Billion Amid AI Spending Concerns and Geopolitical Uncertainty

Woodshaw Financial Group principal D.R. Barton explains why Alphabet’s increased CAPEX for AI is a positive and sees market pullbacks as buying opportunities for Alphabet stock on Varney & Co.

Shares in the Magnificent 7 tech stocks have slumped this week amid investors’ concerns about massive spending by hyperscalers on artificial intelligence infrastructure, compounded by uncertainty about the global economy following the resumption of hostilities in the Iran war.

The so-called Magnificent Seven tech stocks experienced their biggest one-day drop in over a year on Thursday, with Bloomberg reporting that an index of the group fell 4.8% and erased about $787 billion in market value – the steepest single-day decline since April 2025.

The report noted that as of Thursday’s close, the Mag Seven index was down about 11% from the record high it reached in late May, with approximately $2 trillion in market capitalization wiped out.

As of Friday morning, six of the Mag Seven stocks were down over the last five days of trading, with Tesla down over 19%, while shares in Google parent Alphabet (-8.5%), Amazon (-6.3%), Meta (-6%), Microsoft (-1.3%) and Apple (-0.4%) were also lower. By contrast, Nvidia shares were up about 1.9% in the last five days.

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Traders work on the floor of the New York Stock Exchange (NYSE) in Lower Manhattan. (Michael Nagle/Bloomberg via Getty Images)

Tech stocks’ slide steepened after Alphabet and Tesla released their earnings reports following Wednesday’s trading session, with both companies announcing significant capital expenditures this year.

Alphabet announced plans to spend approximately $200 billion on capex this year, up from a prior estimate of $190 billion, with the increased spending on AI data centers and infrastructure contributing to the company’s quarterly cash flow turning positive for the first time since Google went public, according to Bloomberg’s report.

“Alphabet’s higher investment outlook helps reinforce our view that the AI infrastructure buildout remains a durable theme,” said Edward Jones senior analyst Brian Therien. “However, the negative share-price reaction may indicate that investors are becoming more focused on returns generated on AI-related investments.”

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Tesla CEO Elon Musk said that the company needs to spend as much as it can on capital expenditures without being wasteful. (Richard Bord/WireImage)

Tesla’s profits came in well below the estimates of Wall Street analysts amid a ramp-up in spending, with CEO Elon Musk stating on the company’s earnings call that 2026 will be a “massive capex year” and that the company “should be spending on capex as fast as we can – spend as fast as we can without it being too wasteful.”

The company’s spending aims to enhance its AI capabilities as well as boost production of Optimus humanoid robots, along with robotaxis and autonomous vehicles.

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Ryan Lee, senior vice president of product and strategy at Direxion, said in a note that, “While Tesla continues to invest heavily in AI and robotics, monetization remains the central concern following the earnings miss.”

“Tesla has become the physical AI story, with the potential to bring artificial intelligence into consumers’ everyday lives through autonomous vehicles and robotics. The question is how quickly those investments can begin supporting the valuation,” Lee added.

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