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The Magnificent Seven refers to the seven tech giants that lead Wall Street by market capitalization. Consisting of Apple, Meta, Nvidia, Alphabet, Microsoft, Amazon, and Tesla, the performance of the stocks has a significant impact on the wider market, consumer sentiment, and economic trends. 

Amid a downturn that’s seen the S&P 500 shed almost 5% of its value in 2025 so far, Magnificent Seven stocks shed more than $750 billion in market value on Monday, March 10, alone. 

Among the exchanges worst affected by the sell-offs, the Nasdaq suffered its heaviest decline since 2022, with analysts pointing to the prospect of Trump’s tariffs creating expensive import costs and higher business overheads at scale for any firm dependent on foreign components and production. 

Worryingly for investors, AI-focused firms Apple (Nasdaq: AAPL) and Nvidia (Nasdaq: NVDA) shed $174 billion and $140 billion of their values respectively. In the case of Nvidia, the stock has shed around 28% of its value since the opening week of January. 

Even the usually bold strategist Cathie Wood’s Ark Innovation ETF has been caught up in the sell-offs, with the firm selling 67,967 shares of game developer Roblox Corp. (NYSE: RBLX) worth around $4 million. 

The negative sentiment sweeping Wall Street will rekindle memories of 2022, as the post-pandemic recovery pushed stocks lower before the arrival of OpenAI’s generative AI ChatGPT model kicked off a resurgence to record-breaking highs. 

Now, with generative AI more commonplace, has the bubble burst on US markets? 

Dotcom 2.0?

There are certainly similarities between the AI boom and the ill-fated dotcom bubble of the turn of the Century. As MoneyWeek investment writer Dan McEvoy notes, one characteristic that remains prevalent is the appetite investors had for companies that were yet to turn a profit. 

The logic is that investors pay now with the expected earnings of the company in mind for the future. After all, if you believe that a USP will push a company to high earnings in the future, it makes sense to buy the stock early. 

Along with the appetite for unprofitable stocks, we saw investors inflate the value of companies based on their potential. During the dotcom boom, Cisco (Nasdaq: CSCO) became the world’s most valuable company, trading at around 200 times its earnings. 

With hindsight, investors were right to assume the stock would increase its earnings. But the $10.32 billion net income the stock made in 2024 is closer to four times the $2.67 billion it made in 2000, which is some shortfall from market expectations. 

Today, Nvidia trades at 38 times its trailing earnings, and 25 times its expected earnings over the next 12 months. 

This indicates that investors haven’t heeded the warnings of the dotcom bubble, but there’s also evidence that generative AI is an innovation that can have a far stronger global impact than the majority of innovations that have come before it. The decision investors need to make is whether artificial intelligence can really drive Nvidia 38-times higher in the decades ahead. 

Catching the Falling Knife

Despite the turning sentiment on Wall Street, there’s still plenty of bullish perspectives to digest. These mostly focus on the sweeping potential of artificial intelligence, which every member of Wall Street’s Magnificent Seven is in a strong position to monetize. 

Although the rollout of China’s rival model, DeepSeek, has shaken the presumed market dominance of US AI firms, revenue growth forecasts for the Magnificent Seven remain robust, suggesting that the stocks have plenty of room to turn their fortunes around. 

With bond traders now betting on sooner Federal Reserve rate cuts in June 2025 due to the adverse economic impact of a prospective trade war between the United States and its historical trading partners, investors may be keen to time the market right and pick up discounted tech stocks. 

The Bank of Atlanta has forecasted negative economic growth during the first quarter in the United States, prompted by a decline in net exports, and given the inflationary impact of tariffs, it’s feasible that interest rates could be cut in a move that could help to reverse the fortunes of Magnificent Seven stocks on wall streets. 

Tariffs to Decide Wall Street’s Fate

Wall Street’s performance in 2025 is likely to rest on the outcome of President Donald Trump’s trade tariffs. With China serving as Tesla’s second largest market after the United States and Apple making the majority of its iPhones there, the outcome of the brewing trade wars between the United States and its trading partners will be decisive. 

Although the President appears to be more relaxed when it comes to following up his tariff threats with action, growing competition in AI markets from China means that Wall Street can’t afford to lose ground in the artificial intelligence boom to overseas rivals. 

The recent preview of China’s Manus AI model, an agent that can autonomously perform tasks like planning trips and analyzing stocks, follows DeepSeek in a timely reminder that the Magnificent Seven has international competition as well as domestic competitors. 

The potential of artificial intelligence may prove to be exceptional enough to push Wall Street higher in the future, but US firms face a battle to overcome its geopolitical and economic pressures to maintain its dominance in a highly competitive sector.

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