Magnificent no more: As Nvidia stock soars, here's why investors have been fleeing Alphabet and Meta

The Magnificent Seven may not be the dominant engine of stock gains that they once were, but it’s stark just how sharply some of their fortunes have diverged this year.

Nvidia on Wednesday proved that the AI trade is alive and well, and the stock was being rewarded for it on Thursday. Shares were up 10% around midday, with investors cheering the bullish report that came at a critical time for the AI trade. The stock is up 23% in 2026.

The chip titan wowed the market with yet another quarter of enormous revenue and predictions for even more growth to come, no small feat for the world’s largest company that’s already worth $5.5 trillion.

Meanwhile, there’s Alphabet and Meta, previously two of the highest-flying Magnificent Seven stocks. The companies are now struggling to find their footing as investors punish the shares for a variety of concerns, among them waning free cash flow and worries that both tech firms are spending excessively on AI.

Alphabet — which appeared to be the outlier of the Magnificent Seven group earlier this year, rising even as the other hyperscalers sold off — has seen its stock tumble. Shares of the Google parent have dropped 15% from their peak in May, trading around $336 a share on Thursday. The decline marks a $692 billion loss in market cap over the last three months, though the stock is still up 7% this year.

Meta‘s losing streak has been longer and more pronounced, on a year to date and a 12-month basis. Shares of the social media giant are down 27% from their peak in August of last year, trading around $571 on Thursday. The stock has shed over $500 billion in market cap since its peak in August 2025.

“There’s always rotation within the Mag Seven,” Bret Kenwell, an investment and options analyst at eToro, told Business Insider, pointing to how Alphabet used to be the “superstar” within the group of tech giants.

Here’s what has driven the latest declines for Alphabet and Meta:

Alphabet: Capex, leadership changes, and product delays

Concerns about AI capex spending have been a key issue weighing on Alphabet stock lately, Kenwell said. The firm is on track to spend as much as $205 billion on AI this year, up from the previous guidance of $180 billion to $190 billion.

“Alphabet’s rapidly expanding AI infrastructure spending has become the central issue. Cloud growth remains impressive, but management must demonstrate that escalating capital expenditures will ultimately translate into profitable growth,” Mark Malek, chief investment officer at Siebert Financial, wrote last month.

“At the end of the day, investors want to see these big investments in AI having some sort of tangible return,” Kenwell said.

Alphabet has also seen a string of high-profile exits lately. In August, Jeff Dean, Google’s former chief scientist, left the firm to build his AI startup, while Demis Hassabis, the former CEO of Google’s DeepMind AI lab, stepped down from the position to take on a broader role at the company. Shares tumbled the day the reshuffle was announced.

Investors may also be dismayed by the delay of the company’s new AI model, Gemini 3.5 Pro, Kenwell added. The model is expected to bring improvements to its coding tools, an area in which Alphabet is seen as lagging behind its competitors.

Meta: AI spending, monetization, and cash flow concerns

The story at Meta has been predominantly about the firm’s heavy AI spend. The firm expects to spend as much as $145 billion on capital expenditures this year, up from the previous guidance of $115 billion to $135 billion.

The Facebook and Instagram parent is also in the early stages of its monetization plans, having recently announced subscription tiers for its AI model and its core social media services in May. Alphabet, Microsoft, and Amazon all appear to have clearer monetization models compared to Meta, Kenwell added.

“I think there might still be some question marks around Meta,” he said. “There’s just some questions around the spending and it probably didn’t help that they went through that giant metaverse writedown,” Kenwell added, referring to how Meta recorded over $80 billion in losses on its metaverse projects.

Investors are also grappling with a few financial concerns. On the one hand, the company’s free cash flow is dwindling, having plunged 91% in the second quarter to $784 million, according to its latest earnings call.

Further muddying the picture is Meta’s teen addiction lawsuit, which it agreed to settle for $18 billion this week. That cash hit is coming at the exact time the firm needs that money, Needham analysts wrote this week.

“The timing of payments couldn’t be worse,” the firm said. “This settlement adds another cash financing requirement as META battles to keep up with larger competitors in the AI race.”

The company also risks losing users, the analysts added, pointing to how Meta is required to implement features like two-hour daily limits for teens as part of the settlement.

Investors will be more keen to re-invest in Meta and Alphabet once both companies see more momentum in their businesses, Kenwell said, pointing to how other Magnificent Seven stocks have rebounded from their latest declines this summer after showing “tangible acceleration.”

“They don’t need the full payoff. They don’t need to see this immediate, enormous acceleration. They just need to see that there is a growth avenue from this big investment,” Kenwell said.