Bloomberg reported that the Magnificent Seven technology behemoths suffered their biggest one-day drop since the tariff tantrum in April 2025, with an index of the group falling 4.8% and wiping out $797 billion in market value.
The selloff pushed the S&P 500 down 1.2% and the Nasdaq 100 sank 1.9%. The culprit was earnings from Alphabet and Tesla, which spooked traders and cast doubt on the durability of the AI trade. Alphabet raised its capital spending forecast to as much as $205 billion this year, while Tesla CEO Elon Musk told investors that 2026 will be a massive capex year after reporting profits far below expectations.
Mahoney Asset Management CEO Ken Mahoney said the real problem is the amount of spend going on, with no one knowing what the return on investment is. He called it the perfect storm, citing oil prices rising as the Iran war escalates.
The Mag 7 index is now down 11% from a record reached in late May, erasing $2 trillion in market value. Alphabet's $45 billion spending in the second quarter turned its cash flow negative for the first time as a public company.
Tesla plunged 15% for its worst day since March 2025, and Alphabet sank 7.1% for its biggest drop since May 2025. Microsoft fell 2.2%, Amazon sank 4.6% and Meta declined 3.4%. Apple had the shallowest decline, having largely sat out the AI spending spree, with shares gaining 11% this month.
Bold Wealth Partners CIO Jason Lemire said these companies used to have the healthiest balance sheets in corporate America history, but are now asset heavy with questions about ROI and transparency on debt obligations.