The great rotation: Investors desert the Magnificent 7, crypto for AI bottlenecks
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- Magnificent 7 stocks have lost momentum, with Microsoft down 33% from recent highs, Meta off 28%, Tesla down 20%, and Nvidia, Amazon, and Alphabet all more than 10% below their peaks; Apple leads the group at -7%.
- Bitcoin holds roughly 50% below its October peak as part of the same capital flight out of the market's recent winners.
- Sandisk (SNDK) has surged approximately 800% year-to-date and Micron Technology (MU) is up about 230%, while the VanEck Semiconductor ETF (SMH) has gained 67% as investors chase the bottleneck companies feeding the AI boom.
- Alphabet, Amazon, Microsoft, and Meta are expected to spend a combined $725 billion on capex this year—a 77% jump from last year's record—while free cash flow no longer fully funds their ambitions.
- Alphabet, Amazon, and Meta collectively issued about $93 billion in bonds last year, roughly 6% of total corporate bond issuance, to help finance the AI buildout.
- Share repurchases by the hyperscalers have fallen 33% to $132 billion in 2025, removing a key pillar of demand for these stocks.
- SpaceX raised $75 billion in the largest IPO in history last week, attracting capital as Elon Musk's space company expands into AI.
Why it matters: The rotation re-prices who captures AI's value: infrastructure suppliers and SpaceX are now the preferred vehicles, while hyperscalers face shrinking free cash flow, $93 billion in new bond issuance, and 33% lower share buybacks. The $725 billion capex commitment—up 77% year-over-year—means the cash drain on Mag 7 balance sheets will continue to grow.
