Name: Mag 7 trade splinters as AI winners pull away heading into 2026
Uploaded: 2025-12-29T14:59:39.805Z
Duration: 1 min 35 s
Description: A widening performance gap inside the Mag 7 is forcing investors to reward companies that can turn AI spending into revenue and margins, while penalizing heavy spenders with unclear payoffs — and why distribution-first players like Apple could have a different upside path next year.

A widening performance gap inside the Mag 7 is forcing investors to reward companies that can turn AI spending into revenue and margins, while penalizing heavy spenders with unclear payoffs — and why distribution-first players like Apple could have a different upside path next year.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

The MAG7 group of mega-cap technology stocks saw a strong collective performance, with the CNBC index tracking them up over 25%. However, a significant disparity has emerged within the group, with a 60 percentage point spread between the best and worst performers, driven largely by the ability to convert AI investments into profits.

Alphabet led the group with a 65% gain, benefiting from its in-house technology and strong cloud growth, while Amazon and Meta lagged due to concerns about the returns on their heavy AI spending. Apple, which has mostly stayed out of the AI infrastructure race, showed moderate gains and could benefit if it leverages its distribution without incurring high costs.

Mag 7 trade splinters as AI winners pull away heading into 2026

All right, it's been another solid year for the MAG7 collectively. The CNBC index that tracks those mega cap names up more than 25%. But as Mackenzie Sagalos reports, there's a growing disparity between the haves and the have nots within the MAG7. The MAG7 trade is splintered this year and 2026 could widen that gap even further. We're looking at a roughly 60 percentage point spread between the best and worst performers. Alphabet up 65%, Amazon just five and a half percent, with the market now differentiating based on who can actually convert AI spend into margin and revenue. Alphabet stands out because it owns the full stack. Its in-house TPU chips cut reliance on NVIDIA and give it a structural cost advantage. Google Cloud grew 34% with operating margins expanding to nearly 24%. Contrast that with Meta. It raised its 2026 CapEx guide and its stock had its worst day in three years as investors questioned the payoff timeline. Amazon, that's been a laggard as well. AWS growth has trailed Google Cloud and Azure. Now, yes, it is coming off a higher base, but the heavy AI spending still isn't translating into share gains. And here's the key. If model quality keeps converging, which it is, then distribution and monetization start to matter more than benchmark bragging rights. That means that the laggard risk sits squarely with heavy spenders who can't show clear returns. It also opens the door for names like Apple, up around 12% so far this year. It's largely sat out the AI infrastructure arms race, and if it can capture value through distribution without the massive trading costs, that's a different kind of upside story. Frank, sending it back to you.

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Mag 7 trade splinters as AI winners pull away heading into 2026

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Rise of AI