Magnificent Seven Leadership Faces Challenges as MAGS ETF Falters: Is AI Losing Ground?

The renowned Magnificent Seven (Mag 7) stocks are currently under intense scrutiny as their previously steadfast market position faces significant challenges.

Concerns regarding inflated valuations and investments in artificial intelligence (AI) have begun to exert pressure on these mega-cap tech stocks. The Bloomberg Mag Seven Index, which is an equal-weighted collection of these leading companies, has officially entered correction territory, declining by 10% year-to-date, as highlighted by Adam Turnquist, Chief Technical Strategist at LPL Financial.

Technical Analysis: Critical Support Levels in Jeopardy

Turnquist has observed that the group has broken through an important uptrend that had been in place since October 2023. Currently, they are testing vital support around the 200-day moving average. If this support fails, it could lead to even more significant losses, possibly revisiting lows last seen in August.

Additionally, the relative strength of the Magnificent Seven compared to the equal-weight S&P 500 is at a crucial turning point. Turnquist warns that if the current support does not hold, the leadership status of these stocks may be at risk.

MAGS ETF Reflects Bearish Momentum

The Roundhill Magnificent Seven ETF (MAGS), which tracks the performance of these key stocks, is echoing the underlying weakness in the market. Year-to-date, MAGS has fallen by 8.07%, with a more recent drop of 9.29% in the past month alone.

Current technical indicators paint a discouraging picture, as the stock trades below its eight-day, 20-day, and 50-day simple moving averages, all of which signal a strong bearish trend. However, the 200-day simple moving average at $48.76 serves as a potential point of support where some buying interest is beginning to emerge.

The Chinese Challenge: Rising Competition in AI

Compounding these challenges is the emergence of China's DeepSeek AI platform, which raises questions about whether U.S. tech giants can sustain their dominance in the AI sector.

As these companies transition from asset-light to asset-heavy operational models, future earnings growth faces new hurdles, leaving investors questioning if the current decline is simply a temporary setback or a sign that the reign of the Magnificent Seven may be coming to an end.

stocks, markets, AI