2025 was another banner year for the Magnificent Seven stocks, which have delivered the majority of the S&P 500’s gains over the past few years. These stocks, consisting of Alphabet (NASDAQ:GOOG,GOOGL), Amazon (NASDAQ:AMZN), NVIDIA (NASDAQ:NVDA), Meta (NASDAQ:META), Tesla (NASDAQ:TSLA), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) are also among the most-watched stocks going into 2026. Will the Magnificent Seven go up this year, or is 2026 the year in which the trend of skyrocketing tech stocks will finally cool off?
The Positive Outlook For 2026
Going into the year, things are shaping up to be quite positive for the Magnificent Seven. To begin with, earnings are expected to keep rising at a faster rate than the overall market, with EPS growth of about 23 percent called for across the group of seven stocks. Most of the businesses in the group are also flush with cash, as illustrated by Alphabet’s nearly $100 billion stockpile.
The large cash reserves carried by the Magnificent Seven are crucial for several reasons. To begin with, CapEx will have to remain high in 2026 as ongoing investments in data centers and other infrastructure continue. Additionally, several of the businesses in the group are driving additional shareholder value through share buybacks, dividends or a combination of the two. Significant cash also gives the Magnificent Seven flexibility to pursue acquisitions as needed to gain valuable technology and talent.
On the AI front, 2026 is expected to see the ongoing rise of agentic AI, a version of the technology that could finally deliver on some of its much-discussed potential for massive productivity gains. With demand for computing power and more advanced models still rising rapidly, the largest tech businesses that have already entrenched themselves on the front lines of the AI world are likely to see steady gains.
The Magnificent Seven and other tech stocks could also benefit from easier Fed policy this year. Recent projections from the Congressional Budget Office call for rate cuts in 2026, with lower interest rates persisting until at least 2028. In addition to stimulating overall economic activity, lower rates tend to benefit high-growth tech stocks by making their long-term growth stories more appealing when compared to benchmark Treasury instruments.
The Expected Fracturing of the AI Market
One of the expected characteristics of the market in 2026 is a rebalancing of returns. For the past couple of years, the handful of largest tech firms have overwhelmingly dragged the broader market up with them. With these businesses maturing and investment capital seeking opportunities in smaller firms with AI exposure, 2026 could be the year that the rest of the S&P 500 begins to catch up to the Magnificent Seven.
Tesla as a Potential Odd Man Out
While 2026 is shaping up to be basically positive for the large tech firms, Tesla may be the most vulnerable of the group. Currently trading at 291 times earnings and 225 times operating cash flow, the EV maker is facing a slew of fundamental challenges. Earnings have decreased for four quarters, and the number of vehicles Tesla has sold has declined for two consecutive years. Tesla is also losing its market supremacy, having been surpassed by China’s BYD as the world’s largest EV maker and facing increasing pressure from electric models released by legacy automakers.
Tesla’s position within the group, however, may end up being taken over by Broadcom (NASDAQ:AVGO), a chipmaker that has already surpassed it in terms of market capitalization. While Tesla’s returns over the last 12 months have come in at a fairly average 10.4 percent, shares of AVGO have surged by 45.0 percent amid strong revenue and earnings growth. Though not traditionally counted among the Magnificent Seven, Broadcom may end up as a high-growth story of 2026, while Tesla could continue to struggle.
The Looming Question of an AI Bubble
Another factor that’s worth looking at is whether or not a bubble has formed around the Magnificent Seven due to their high exposure to AI. Although the technology’s failure to reliably produce ROI for users and an increasingly circular ecosystem among top firms do raise concerns of a bubble, the conditions going into 2026 actually look fairly positive. Nearly 70 percent of businesses plan to increase spending on AI this year, likely producing continued upward pressure on many of the Magnificent Seven stocks.
This isn’t to say, however, that the concerns of an AI bubble are unfounded. Taking a longer-term view, high valuations and risks associated with the gap between AI expectations and current reality could drag on several members of the Magnificent Seven. Concerns have also been raised about the economics of the data centers that power AI, as these assets face rapid depreciation and a short lifetime prior to obsolescence in which to achieve profitability. For now, though, the steady inflow of cash from ongoing AI investment will likely keep these large tech stocks riding high.
It’s also worth noting that these concerns could make the highly valued Magnificent Seven and other tech stocks volatile in 2026. Late in 2025, tech stocks wobbled a few times on concerns about valuations and the outlook for AI. Though 2026 could be the year in which AI starts maturing into a more useful technology, it still seems likely that the largest and most highly priced tech stocks could see significant swings throughout the year.
Will The Magnificent 7 Rise in 2026?
Overall, the outlook for the Magnificent Seven in 2026 looks fairly positive. With earnings growth expected to remain above 20 percent across the group and investment in AI ticking up, the essential conditions for further gains this year seem to be in place. With that said, the Magnificent Seven may not be able to deliver the same wildly positive returns they have in the past couple of years, and earnings growth among the rest of the S&P 500 may close some of the gap between the performance of the index at large and the performance of its seven top tech giants.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.