MW The 'Magnificent Seven' correction may actually be a sign of a healthy stock market

By Christine Ji

The Big Tech grouping officially fell into correction territory on Tuesday as mounting concerns about AI spending weighs down the group

The "Magnificent Seven" cohort currently accounts for roughly a third of the total market capitalization of the S&P 500 index.

Surging artificial-intelligence spending and persistent inflation worries have fueled one of the fastest retreats for Wall Street's biggest tech names in over a year, pushing a key "Magnificent Seven" fund into correction territory.

The Roundhill Magnificent Seven ETF MAGS - which tracks the performance of Alphabet $(GOOGL)$ $(GOOG)$, Amazon.com (AMZN), Apple $(AAPL)$, Meta Platforms (META), Microsoft $(MSFT)$, Tesla $(TSLA)$ and Nvidia (NVDA) - fell 1.4% on Tuesday.

The MAGS ETF is down 11% from its all-time closing high of $70.94 on May 14. Shares ended Tuesday's session at $63.14, falling below the $63.85 threshold marking a correction, defined as a drop of at least 10% from a recent peak. The group hasn't encountered a selloff of this intensity since April 2025, during the midst of the Trump administration's aggressive tariff announcements, according to Dow Jones Market Data.

While the recent combination of sticky inflation and a hawkish pivot from the Federal Reserve have acted as immediate catalysts for the selloff, investors may be tiring of the Big Tech regime that has dominated markets for the past few years, according to Cullen Rogers, portfolio manager at Wedbush Funds.

The "Magnificent Seven" currently comprise 34% of the S&P 500 SPX by market capitalization. Along with their market caps, those companies' AI capital expenditures have ballooned in recent years. Alphabet, Amazon, Meta and Microsoft are on track to spend a combined $700 billion on their AI businesses this year.

Rogers attributed the selloff among "Magnificent Seven" names to investors taking profits and looking for better opportunities in the market. "The 'Mag Seven' has had a tremendous run," Rogers told MarketWatch. But there are also "second and third derivative AI plays" such as memory stocks that are getting significant attention. The focus has moved from the companies making the AI investments to the beneficiaries of those investments, Rogers pointed out.

The selloff among the "Magnificent Seven" is a sign of a healthy market as investors rotate their money, according to Rogers. "This isn't a rush for the exit," Rogers said. "But it makes a lot of sense to look into the next layers where applications and eventually monetization will occur."

"The law of large numbers works against these companies," Steve Sosnick, chief strategist at Interactive Brokers, told MarketWatch. In his opinion, investors who want exposure to the "Magnificent Seven" have likely already invested in them. "It takes a lot of work now to get fresh money into these stocks," he added.

In recent weeks, Amazon and Nvidia have issued new debt and Alphabet has issued equity to keep up with the capital demands of AI. Big Tech names are transitioning away from their asset-light models by building data centers, and the recent selloff signals an increased focus on their return on investment, Sosnick said. Investors are now demanding more fiscal discipline.

The "Magnificent Seven" certainly remain well-positioned to be AI winners, Sosnick said. These Big Tech companies have made aggressive early investments in various parts of the AI stack, giving them a first-mover advantage. "But there's nothing saying that the current winners are the long-term winners," he said. "The best AI company could yet to be formed."

-Christine Ji

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June 23, 2026 16:43 ET (20:43 GMT)

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