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More Reading from MarketBeat.com

How the Mag 7’s 2025 Laggards Could Turn Into 2026 Winners

Author: Jordan Chussler. First Published: 12/31/2025. 

At a Glance

• While the broad tech sector once again outperformed the S&P 500 in 2025, a handful of the Magnificent Seven stocks failed to live up to their hype.  
• NVIDIA, Apple, Meta Platforms, and Microsoft all trailed the benchmark index’s 17% gain last year.
• While those firms’ enormous AI CapEx is likely to increase, there are plenty of reasons to believe those four stocks will once again outperform in the year ahead.

Tech stocks had another strong showing in 2025, finishing second among the S&P 500’s 11 sectors for the second consecutive year.

But investors who piled into the mega-cap Magnificent Seven saw a mixed bag. Apple (NASDAQ: AAPL), for example, finished the year with a gain of less than 12%, trailing the S&P 500’s 2025 gain of 17.49%.

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Shareholders of Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META), and Amazon (NASDAQ: AMZN) similarly saw modest gains of just over 16%, about 10%, and less than 5%, respectively.

Those aren’t the returns investors expect when paying for the record valuations of a few companies that dominate index weightings. Looking toward 2026, however, there are reasons to believe those four laggards could again outperform the S&P 500.

AI CapEx Hindered the Magnificent 7’s Growth Last Year

That underperformance wasn’t uniform. Three of the Magnificent Seven outpaced the S&P 500: Tesla (NASDAQ: TSLA), NVIDIA (NASDAQ: NVDA), and Alphabet (NASDAQ: GOOGL) returned nearly 21%, 36%, and 66%, respectively.

For the other four, performance diverged notably. Much of the difference reflected record-high valuations and concerns about market concentration and an AI bubble.

More specifically, AI—and the elevated capital expenditures (CapEx) tied to those firms’ AI ambitions—was the primary culprit.

Amazon’s underperformance can be partly attributed to its AI infrastructure spending, which was a large share of the roughly $400 billion Big Tech spent on chips, data centers, and storage solutions and services in 2025.

For Amazon, that spending totaled about $125 billion last year, including $11 billion for a 1,200-acre data center in Indiana and $10 billion for a 20-building project in North Carolina’s Research Triangle that will serve Amazon Web Services (AWS).

That investment pressure eroded the company’s free cash flow, which fell from $3.6 billion in Q4 2024 to -$12.4 billion in Q1 2025 and -$8.4 billion in Q2 2025.

Apple has faced criticism for underspending on AI but plans to increase AI CapEx in the year ahead to catch up with Microsoft and Meta. Those rivals have committed large sums to Azure, Copilot, and Meta AI, which have weighed on their near-term results as well.

Amazon’s Business Diversification and Robotics

Since its all-time high on Nov. 3, 2025, AMZN is down nearly 9%. The company is pursuing other ways to offset heavy AI CapEx.

Amazon is positioning itself as a grocery disruptor and plans to expand its robotics program—an initiative that could replace up to 600,000 jobs and significantly reduce payroll costs.

At the same time, AWS remains the world’s largest cloud services provider with about 31% of global market share. From Q3 2021 to Q3 2025, AWS revenue grew from $16.11 billion to $33.01 billion—a nearly 105% increase.

The company hasn’t missed earnings expectations since Q4 2022, delivering 11 consecutive beats. Analysts are bullish on AMZN in 2026: 58 of 61 analysts covering the stock assign it a Buy rating, and the average 12-month price target implies about 27.4% potential upside.

Apple’s Stock Buybacks Signal Positive Expectations

Apple hasn’t committed nearly as much to AI CapEx yet, but it plans to scale up spending to remain competitive. Meanwhile, the iPhone maker’s $185.65 billion in stock buybacks in 2025 reduced the share count and increased earnings per share, supporting shareholder value.

While retail traders experienced heightened volatility over the past 12 months, institutional investors were net buyers of AAPL, with inflows of about $316 billion compared with $174 billion in outflows.

The company has beat earnings expectations every quarter since Q1 2023, and quarterly net income grew more than 86% between Q4 2024 and Q4 2025, from $14.7 billion to $27.4 billion.

Tariff uncertainty weighed on Apple’s China and India businesses in 2025. With more clarity around trade policy, that headwind should ease going forward.

Meta Has Wall Street on Its Side

Meta’s AI spending pushed net income down 87%, from $20.8 billion in Q4 2024 to $2.7 billion in Q3 2025. Despite that drop, Wall Street remains broadly supportive.

Of the 50 analysts covering META, 43 assign it a Buy rating. Their average 12-month price target implies more than 23% potential upside, and institutional ownership stands near 80%.

Analysts expect Meta’s AI investments to pay off: continued adoption of tools like Advantage+ should improve ad efficiency and drive growth in sales and impressions. Expanded monetization of WhatsApp and Threads, along with new AI models (for example, Avocado), are seen as further catalysts despite short-term margin pressure.

Microsoft Is Seeing More Copilot Adoption

Microsoft’s Azure, the world’s second-largest cloud provider behind AWS, commands roughly 20%–22% of global market share and remains a key growth engine. Azure helped drive a 40% revenue increase in Q1 2026.

For Microsoft, a primary 2026 tailwind is growing adoption of Copilot. The AI-powered assistant—integrated across Windows and the Microsoft 365 suite—is now used by more than 90% of Fortune 500 companies.

Analysts estimate AI cloud adoption could add up to $25 billion to Microsoft’s revenue by the end of FY 2026. Accordingly, 39 of 43 analysts covering MSFT assign it a Buy rating, and the average 12-month price target implies more than 29% potential upside.

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