The myth of the "Seven Giants" in the US stock market is loosening, Bank of America’s Hartnett: The next round of winners must rely on AI to reshape their businesses

The once-unified "Seven Giants" that drove the U.S. stock market is now disintegrating. This massive tech stock combination, once seen as a solid entity, is no longer viewed as a single asset class by investors. As the market's perspective on the artificial intelligence boom becomes more rational and cautious, the fortunes of these trillion-dollar giants have diverged significantly over the past year.

In the recently concluded year of 2025, only Alphabet and NVIDIA outperformed the S&P 500 index. As we enter the new year, this trend of divergence continues, with five of the "Seven Giants" underperforming the market benchmark. The AI trading strategies that once dominated the market are undergoing a transformation, with funds no longer blindly flooding into the entire sector but instead making more selective bets.

This breakdown of correlation is reshaping the market landscape. Investment managers point out that the "Seven Giants"—which include Microsoft, Meta, Apple, Amazon, Tesla, Alphabet, and NVIDIA—are no longer synonymous with a consistently rising stock market. As the AI arms race deepens, these companies are showing varied performances in strategic investments and core business growth, leading to their stock prices no longer moving in sync.

David Bahnsen, Chief Investment Officer of Bahnsen Group, candidly stated: “The correlation among them has collapsed. The only thing they have in common now is that they all have trillion-dollar market capitalizations.”

Divergence and Reconstruction of AI Trading

As the bull market evolves, the trading logic surrounding artificial intelligence has changed. Some investors expect the AI dividend to spread to industries such as healthcare, while others continue to double down on chip manufacturers or energy companies. In this context, the once closely-knit "Seven Giants" are being redefined by the market, possibly shrinking to "Five Giants" or even "Four Giants."

Bank of America strategist Michael Hartnett coined this term in 2023, borrowing from the classic Western film "The Magnificent Seven." He pointed out, the market is beginning to broaden, and “the next ‘Seven Giants’ will be those large enterprises that can prove AI applications are reshaping their vast businesses.”

Hartnett also reminded investors to recall the ending of the movie:

“Don’t forget, in that film, only a few survived.”

Winners and Losers Among the Giants

Currently, these tech giants are at different stages of development. Amazon, Alphabet, Microsoft, and Meta have transformed into "hyperscalers," investing hundreds of billions of dollars to train new AI models, build data centers, and expand cloud computing capabilities. Meanwhile, NVIDIA continues to dominate the chip market required for running advanced AI models In contrast, other members appear to be lagging behind. Apple's stock price underperformed the S&P 500 index last year, facing criticism for its relatively low investment in AI and being perceived as falling behind competitors. The once market darling Tesla has also significantly lagged behind its peers, primarily constrained by a slowdown in electric vehicle sales.

Michael Arone, Chief Investment Strategist at State Street Investment Management, stated:

"They are all at different stages. It used to be a rising tide lifts all boats, but now we will see winners and losers."

Retail Investors Exiting and Historical Cycles

In addition to the changing views of professional institutions, retail investors' enthusiasm is also cooling. According to Vanda Research, the proportion of retail investors in the total trading volume of the "Seven Giants" stocks significantly decreased compared to 2023 and 2024. Among them, Tesla, a long-time favorite of retail investors, saw the largest decline in retail trading activity. By 2025, Tesla's average daily retail turnover rate had dropped by 43% from its peak two years ago.

Despite the divergent trends, these seven companies still have a massive overall impact on the market. According to Dow Jones market data, they collectively account for about 36% of the market capitalization of the S&P 500 index.

Wall Street's history is filled with various once-popular but ultimately outdated portfolio nicknames, from the Nifty Fifty of the 1960s to the retail-driven WATCH and the previous tech stock combinations FANG and FAANG.

Arone believes that while the "Seven Giants" may have lost the reasons that initially connected them in investors' minds, there is currently no other stock combination to take their place. "There are no suitable alternatives at the moment," he said, "but I think there might be."