Nvidia Is the Best Buy in a Sinking Magnificent Seven
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- Magnificent Seven stocks — Apple, Alphabet, Tesla, Nvidia, Meta, Microsoft, and Amazon — have all declined in 2026 and underperformed the S&P 500, with Microsoft hit hardest on fears that AI will disrupt software companies
- Amazon, Microsoft, Alphabet, and Meta Platforms are set to spend close to $700 billion in capital expenditures this year, much of it on AI infrastructure, stoking investor doubt that the returns will materialize
- Invesco S&P SmallCap Information Technology ETF (PSCT) has climbed 6% and the Russell 2000 is flat year-to-date, both beating the S&P 500 as capital rotates from mega-cap tech into small caps
- Energy has emerged as a market winner driven by the war in Iran, while six of the seven Magnificent Seven names (excluding Tesla's 300+ trailing P/E) now trade at valuations in line with the S&P 500's P/E of 25.6
- Nvidia is the standout buy, with analysts projecting adjusted EPS to climb from $4.77 last year to $8.29 — a forward P/E of less than 21, the cheapest growth profile in the group
- CEO Jensen Huang has forecast $1 trillion in revenue over the next two years, and Nvidia has posted two consecutive quarters of accelerating revenue growth, defying expectations of a post-AI-boom slowdown
Why it matters: Nvidia's sub-21 forward P/E and rising earnings imply the market is pricing in an AI slowdown, yet the company has guided to $1 trillion in cumulative revenue and is still accelerating — a potential mispricing worth a re-rating. Conversely, the $700 billion collective AI capex bet by Amazon, Microsoft, Alphabet, and Meta means any wobble in AI demand would simultaneously pressure all four earnings streams.
