AI Splits Magnificent Seven: Nvidia Soars, Apple Slumps

• Diverging AI strategies split stock performance for the Magnificent Seven in 2024.
• Nvidia, Meta, and Microsoft surge on AI progress as Apple and Tesla stumble.

On June 14, 2024, Bloomberg reported a significant divergence in the stock performance of the Magnificent Seven: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla. These tech giants, once aligned in market trends, now follow separate paths, with their different approaches to artificial intelligence largely dictating these new trajectories. Aggressive AI strategies have allowed Nvidia, Meta, and Microsoft to surge ahead with substantial stock gains. In contrast, Apple, Tesla, and Alphabet are struggling with strategic missteps and external pressures, while Amazon sits in the middle, balancing steady AI investments with market stability.

Nvidia has solidified its leadership in the AI revolution, as surging demand for its advanced AI chips has driven its stock to new heights and pushed its valuation to have exceeded $3 trillion. Analysts project that robust demand for AI-grade data centers will drive Nvidia’s revenue to $260 billion by fiscal 2026. Similarly, Microsoft and Meta have seen their stocks climb 19% and 42% respectively in 2024. Microsoft's deep collaboration with OpenAI and its rapid integration of AI across its software ecosystem have bolstered investor confidence, and Wall Street now forecasts 15% annualized revenue growth for the company through 2027. Meanwhile, Meta has committed heavily to AI, and CEO Mark Zuckerberg has made AI central to his growth strategy, further strengthening investor sentiment.

In contrast, Apple and Tesla have experienced notable stock changes in 2024, with Apple rising 11% and Tesla falling 27%, respectively. Apple’s "Apple Intelligence" launch in 2024 fell short of expectations. Delays in enhancing Siri are hampering its AI strategy, as the company does not expect to release major updates until 2025, prolonging the uncertainty. At Tesla, CEO Elon Musk’s pivot toward robotics and AI has failed to impress Wall Street amid a cooling electric vehicle (EV) market. Alphabet faces its own challenges, as antitrust pressures in the U.S. and Europe, along with increased competition for Google Search, have not prevented its stock from rising 27% this year, even after rolling out cutting-edge AI technologies like Gemini.

Amazon, meanwhile, continues to chart a stable course, with its stock up 24% year to date. While it has not achieved the dramatic gains of Nvidia or Microsoft, Amazon’s strategic investment in Anthropic, a leading AI firm, allows it to remain competitive without significant volatility.

Looking ahead, the Magnificent Seven’s second-quarter earnings reports will likely reveal if these performance gaps will widen. With six of the seven companies trading at premium valuations compared to the S&P 500 average, analysts are debating whether laggards like Apple, Tesla, and Alphabet can close the gap with the frontrunners. Regardless, the once-unified market narrative for the Magnificent Seven has fractured, marking a significant shift since Bank of America analyst Michael Hartnett first coined the term in 2023.