Every Magnificent Seven stock is now down double digits from its 52-week high, with the group’s losses accelerating as the war in Iran compounds on the already fraught AI trade.
The selloff marks a sharp reversal from years of AI-fueled gains: The index rose 107% in 2023, 67% in 2024, and 25% in 2025. Multiple forces are now working against the group simultaneously. Oil prices have surged since Operation Epic Fury began Feb. 28, reigniting inflation expectations and shifting the interest rate outlook. Markets now price in a greater chance of rate hikes by year-end than cuts, according to CME’s FedWatch tool, removing what had been a key pillar of the bull case for growth stocks.
Still, Capital Economics believes that earnings estimates for the stocks, even as prices have fallen, should give pause to too many ominous comparisons.
While the firm warned that a prolonged conflict could ultimately push the S&P 500 down to 6,000, its baseline view is that the AI build-out won’t be derailed by the war, and that a recovery in valuations will eventually put U.S. stocks back on top later this year.
“That tech outperformance, alongside the fact that the U.S. economy looks less exposed to the conflict than most, informs our view that U.S. equities will continue faring better than their peers,” senior markets economist James Reilly wrote.
Some investors see opportunities where there is wreckage. Robert Edwards, chief investment officer at Edwards Asset Management, argued that Big Tech earnings yields now resemble Treasury yields, and that the group’s strong balance sheets and real earnings growth make them attractive at current levels.
“Big Tech is where valuations are reasonable, where you have real growth,” Edwards said.
Investors seem to have tired of his flip-flopping rhetoric on the war, and have started paying attention instead to the signal of Israel continuing to strike Iran, and vice versa. As of this writing, Iran still has complete control over the Strait of Hormuz, through which 20% of the world’s oil is transported, and is considering adding a toll for ships to pass through the strait.
