The Magnificent Seven trade, once the simplest bet on Wall Street, has splintered. Five of the seven mega-cap tech stocks that dominated markets for years have underperformed the S&P 500 since the start of 2025, leaving only Nvidia and Alphabet, Google’s parent company, carrying the torch for Big Tech outperformance.

The S&P 500 returned 16.4% for 2025. Alphabet crushed that with a roughly 65.4% gain, while Nvidia posted approximately 38.9%. The other five members of the club, Apple, Microsoft, Amazon, Meta Platforms, and Tesla, all failed to keep pace with the broader index.

The great divergence

The term “Magnificent Seven” was coined by Bank of America analyst Michael Hartnett to describe the group: Apple, Microsoft, Nvidia, Amazon, Meta Platforms, Alphabet, and Tesla. These seven stocks collectively represent approximately one-third of the S&P 500’s total market capitalization.

When a third of the index’s weight is spread across just seven names, the performance of those names disproportionately shapes the experience of anyone holding a passive S&P 500 fund. And when five of those seven are dragging, the math gets uncomfortable.

The equal-weighted S&P 500, which gives the same importance to every stock in the index regardless of size, has actually demonstrated better relative performance during this period. It means the average stock in the index is doing fine. The underperformance is concentrated in the very names that were supposed to be bulletproof.

Why the split matters

Nvidia’s outperformance makes intuitive sense. The company sells the picks and shovels of the AI gold rush, the GPUs that every major tech company and startup needs to train and run large language models.

Alphabet’s story is slightly different but equally compelling. Google has managed to integrate AI into its core search and cloud businesses in ways that investors find credible. A 65.4% annual return suggests the market believes Alphabet isn’t just spending on AI but actually monetizing it.

Investor sentiment around AI-related spending appears to have shifted. The market was happy to reward massive capital expenditures on data centers and AI infrastructure when the story was fresh. But as the bills pile up and concrete revenue attributions remain fuzzy for some of these companies, patience has worn thin.

What this means for investors

An investor who went all-in on Alphabet saw a 65.4% return. Someone who spread their bets equally across all seven saw their gains diluted by five laggards.

Analysts have begun questioning whether the Mag 7’s future earnings growth can sustain their outsized weighting in the index compared to the other 493 stocks.

One potential strategy gaining traction: tilting toward the equal-weighted S&P 500 or exploring mid-cap and smaller stocks that have quietly outperformed the Mag 7 laggards. The broader market’s solid 16.4% return proves there’s plenty of opportunity outside the usual suspects.