Citi strategists have declared the 'Magnificent Seven' stock grouping obsolete for artificial intelligence investing. They point to growing performance divergence among the seven companies and a clear rotation of capital toward chipmakers.
Why the label no longer fits
The term 'Magnificent Seven' was coined last year to describe a handful of mega-cap tech stocks that were driving market gains. It includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. But according to Citi, the group's cohesion has broken down. Some of these stocks have surged while others have lagged, making the label less useful for investors trying to capture AI-related returns.
Capital rotation to chipmakers
Citi strategists argue that money is now flowing more heavily into chipmakers. These companies produce the hardware that powers AI models, and they are seeing stronger demand. The shift suggests that the broad 'Magnificent Seven' basket no longer reflects where the real AI opportunity lies. Investors are becoming more selective.
The strategists' view adds to a growing debate about how to categorize AI stocks. The old grouping may have worked when all seven were rising together, but that's no longer the case.
Investors will watch upcoming earnings reports from the group to see if the divergence widens further. Citi's analysis suggests the rotation to chipmakers is likely to continue.
