Tech Titans Falter as S&P 500 Outshines Magnificent 7 in 2025
The Bloomberg Magnificent 7 Index climbed 25% in 2025, trailing the S&P 500's 16% gain—marking the first underperformance since the Fed's 2022 rate hikes began. Only Alphabet and Nvidia drove nearly all of the tech cohort's returns, while Wall Street anticipates this divergence will persist into 2026 amid slowing profit growth and AI investment skepticism.
Tech giants now face a reckoning as earnings momentum wanes. The Magnificent 7's projected 18% profit growth for 2026 barely outpaces the 13% forecast for the rest of the S&P 500, signaling eroded dominance. Early 2026 data shows the trend accelerating, with the tech index eking out a mere 0.5% gain versus the broader market's 1.8% rise.
Investors are shifting focus from AI promises to tangible returns, dispersing capital across sectors. The three-year tech rally that saw Nvidia, Alphabet, Microsoft and Apple contribute over a third of S&P 500 gains since October 2022 appears to be losing steam as market participation broadens.
