EXCLUSIVE: The Mag 7 Slowdown - A 'More Durable Transition' Or Just Another Blip?

The Magnificent Seven have had an iron grip on the market, but cracks are starting to show. Their earnings advantage over the broader market is narrowing, raising questions about whether tech's dominance is finally losing steam.

In an exclusive interview with Benzinga, Violeta Todorova, senior research analyst at Leverage Shares, said she believes this could be the start of a more significant shift.

"We started seeing emerging signs of a more durable transition, as the earnings gap between the Magnificent Seven and the rest of the market is narrowing," she said.

Read Also: From ‘Magnificent 7’ To ‘Maleficent 7,’ Goldman Sachs Slashes Year-End S&P 500 Target

Are Investors Rotating Away From Tech?

The NASDAQ-100 tracking Invesco QQQ ETF QQQ is down 5.38% YTD while the broad technology sector tracking Technology Select Sector SPDR ETF XLK is down 7.13% YTD.

With Big Tech stocks no longer delivering eye-popping outperformances, investors are looking for fresh opportunities. Capital is flowing into financials, industrials and even energy—sectors that have played second fiddle to tech for years. The Financial Select Sector SPDR ETF XLF is up 1.18% YTD, the Industrial Select Sector SPDR ETF XLI is up 1.25% YTD and the Energy Select Sector SPDR ETF XLE is up 5.23% YTD.

While Nvidia Corp NVDA and Microsoft Corp MSFT remain AI darlings, the rest of the pack is facing valuation fatigue.

The AI Boom Can't Save Every Tech Stock

The artificial intelligence revolution has powered tech stocks to new highs, but Todorova warns that AI alone is not enough to sustain growth across the board.

While companies like Microsoft, Amazon.com Inc AMZN and Alphabet Inc GOOGL GOOG are leveraging their strong balance sheets to turn AI from hype into real-world application, concerns are mounting over the long-term returns on these massive investments.

With AI adoption accelerating but stock market leadership shifting, the Magnificent Seven's dominance is being tested as earnings growth slows and broader economic uncertainties loom.

A Temporary Pause Or A Real Shift?

The key question is whether this is just a momentary cooldown or the start of a multi-year rotation. Tech has led for so long that many investors struggle to imagine a different market landscape.

But as earnings dispersion levels out and capital shifts elsewhere, the Magnificent Seven may no longer be a guaranteed one-way bet.

Read Next:

• AI Bubble Bursting? Magnificent 7’s Profit Margins Face Pressure As ‘Capital Spending Can Tumble’ In 2025

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