Using the "down 20%" convention.
From Barron's, Friday morning, February 13:
The Magnificent Seven are all being moved by artificial intelligence again. Except, this time, they’re sinking on fears about AI rather than rising on hopes about the new technology.
The Roundhill Magnificent Seven exchange-traded fund, which provides equal-weight exposure to the so-called Mag 7 large technology companies, closed in correction territory on Thursday, down nearly 11% from its high in late October. The ETF was falling 0.6% in morning trading Friday.
Investors are worried about the returns on AI spending for large U.S. technology companies. Collective capital expenditure this year from Amazon.com, Microsoft, Google-parent Alphabet and social-media company Meta Platforms is set to come in at roughly $650 billion. Concerns about how that is set to impact the companies’ balance sheets and cash flows are leading to rotation into different sectors and overseas markets.
“Focusing solely on the US information technology sector is unlikely to fully capture the direct beneficiaries of AI. With meaningful value creation also occurring elsewhere, we recommend diversification across sectors and geographies,” wrote Mark Haefele, chief investment officer for global wealth management at UBS, in a research note on Friday.
Amazon and Microsoft have led the declines, with both now entering bear market territory, meaning they are down more than 20% or more from their recent highs. Both have been penalized for heavy spending on AI investment without enough cloud-computing growth to satisfy investors that it is money well spent.
Amazon’s stock closed at $199.60 on Thursday, 21% below its recent high. Shares were down 0.6% in morning trading Friday.
Amazon was sliding even before its earnings earlier this month, when it missed quarterly earnings estimates and forecast $200 billion in capital spending in 2026, amid concerns about the company’s cloud growth compared with peers.
However, now some of the Mag 7 stocks that had previously defied the downturn are also suffering. Alphabet, which has been lauded for its Gemini AI and growth in its cloud unit, is now down nearly 7% over the past month. Meta has given up all the gains it recorded after its recent earnings, which highlighted AI-driven growth....
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