The so-called Magnificent 7 (Mag 7) – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla – have tended to outperform the broader market in recent years. (Broadcom has recently overtaken Meta and Tesla, in terms of market cap, but for the purpose of this article, we will stick with the traditional group.)
But since late last year, that leadership has started to fade.
So far in 2026, the group's performance has lagged the broader market, marking a shift from the dominance investors have grown accustomed to.
We’re exploring recent performance, looking at how forecasts have evolved, and diving into the names we think offer the most attractive opportunities in today’s market.
This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments and any income from them will rise and fall in value, so you could get back less than you invest. Ratios also shouldn’t be looked at on their own.
Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
What’s happened?
It’s been a choppy start to the year for these companies. Some of that’s been linked to general market jitters because of the Middle East conflict.
Many of these companies tend to move more sharply than the rest of the market. Six of the seven have a beta above 1, meaning their share prices have historically been more volatile than others in the market. With a median beta of around 1.4, when markets rise or fall, these stocks tend to move about 1.4 times as much. That means in tougher market conditions, they’re more likely to come under added pressure than the average company.
Valuation has also played a role. Towards the back end of 2025, the median forward price-to-earnings ratio for the group moved above its five-year average. Elevated valuations can increase the likelihood of negative reactions when uncertainty rises.
More recently, artificial intelligence (AI) sentiment has become more mixed. Software companies have faced pressure amid concerns that advances from private AI giants like OpenAI and Anthropic could prove disruptive.
At the same time, we’ve seen growing caution about the significant capital being deployed to support AI development, with ongoing debate over how efficiently that investment will translate into future returns.
The positives
Despite this year's weaker performance, changes to underlying earnings expectations tell a more encouraging story. Forecasts for 2026 have largely held up across the group, with several companies seeing their calendar year 2026 revenue and earnings expectations rise since the start of the year.
Nvidia, Apple and Alphabet have all seen forecasts improve, while Microsoft’s outlook has edged up modestly. Tesla is one of the few where expectations have come down. Overall, this suggests recent underperformance has been driven more by shifts in sentiment than by a weakening in near-term financials.
Periods like this also are not unusual.
The chart below shows the past five years of the group's performance relative to the wider market, highlighting several periods when the group lagged (downward sloping line) before regaining leadership. Big tech investors can take some comfort from the fact that this isn’t a totally new relationship, but past performance can’t predict the future.
How to position from here?
While the Mag 7 are often grouped together, each company has its own business model, growth drivers and risks, and they shouldn’t necessarily be viewed as a single, uniform investment opportunity. Over the past year, the group has diverged more than ever, given the opportunities and risks of AI.
We’re on the lookout for those that balance future growth prospects against the price being paid for that growth. Not all offer the same balance, but there are names where the long-term investment case looks more compelling than others.
Nvidia
In our view, Nvidia remains one of the clearest beneficiaries of ongoing investment in AI infrastructure. Following strong recent results, management has pointed to significant medium-term demand, including the potential for around $1trn in data centre revenue between 2025 and 2027.
Our estimates shown below imply faster revenue growth than the current analyst consensus over the coming years, reflecting our more positive view of medium-term demand for AI factories and data centres.
The company’s broad offering across chips, networking and software continues to differentiate it from peers, particularly as customers look to build more integrated AI systems. However, some of its largest customers are also exploring alternative suppliers as they seek to expand computing capacity and reduce reliance on a single provider. We think the growing pie is big enough to absorb some competition.
In our view, the valuation compares favourably to peers, and strong earnings growth and cash generation are both supportive of the investment case. There are key risks around shifts in AI sentiment and potential delays in infrastructure buildout, both of which could place pressure on growth expectations over time.
Meta
Meta sits at the intersection of global social connectivity and digital advertising. Its family of apps, including Facebook, Instagram, and Threads, offers advertisers access to a vast and still-growing audience. AI-driven tools are also improving how effectively those users can be reached and monetised.
Recent performance underlined the strength of that engine. Ad impressions rose 18% last quarter, pricing continued to firm, and revenue guidance landed towards the top end of expectations. AI-powered recommendations are enhancing engagement while delivering better returns for advertisers, allowing Meta to extract more value from its already enormous user base.
Revenue forecasts for 2026 have improved modestly since the start of the year, now more aligned with our internal forecasts – though we are more optimistic about that growth being sustained.
We think the core advertising business can continue generating strong cash flows to support that spend. The valuation reflects risks but gives limited credit for upside if AI investments translate into sustained engagement and monetisation gains.
The risks centre on two points. First, the execution of mammoth AI investments needs to yield results. And second, ongoing legal battles mean Meta's regulatory risk is high.
Microsoft
Microsoft remains well positioned as enterprise demand for cloud and AI infrastructure continues to build. Despite generally solid fundamental performance over the past year, the shares have come under pressure, in part reflecting elevated expectations for its cloud business, Azure, and broader concerns around AI monetisation across software companies.
Recent results highlighted the strength of underlying demand. AI services are contributing a growing share of Azure’s recent growth, with management commentary suggesting momentum across a wide range of workloads. Demand continues to outstrip supply, prompting sustained investment in infrastructure as Microsoft looks to bring additional compute capacity online.
Microsoft 365 remains a core driver of value, with tools like Copilot beginning to support pricing and engagement across key applications. Meanwhile, Azure growth and migration to higher value subscriptions underpin longer-term assumptions.
The investment case here lies in Microsoft’s high-quality businesses, now trading at an attractive valuation. This isn’t a name where our forecasts are ahead of consensus, but one where we think sentiment has dropped too far.
Capital expenditure remains elevated, but strong free cash flow generation leaves the group well placed to fund investment. We also see scope for margin expansion over time as new cloud capacity comes online.
Sentiment is a key risk – it's unclear if or when software stocks will regain some of their mojo, and that could weigh on shares in the short term.
The author holds shares in Nvidia, Meta, Microsoft, and Tesla.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.