Good morning from the Financial Times.
Today is Friday, January 2nd.
I'm Sonia Hudson, and this is your FT News Briefing.
This whole week, we've been looking back at 2025 and trying to predict what will happen in 2026.
It's our last show in this series, and this time we are talking all about tech stocks.
This time last year, the Magnificent Seven were flying high.
These are tech stocks like Amazon and Apple, and they basically propped up the entire U.S. market.
The question on everyone's mind was, will their moment in the sun come to an end?
FT columnist Jillian Tett had an answer to that in the FT's Forecasting the World in 2025 list of predictions.
She said they're not going to fall, but they won't ride a lot higher either.
What actually happened?
Well, it was a bit of a mixed bag.
Jillian is here to tell us more and make a prediction for 2026.
Hi, Jillian.
Hi, good to talk to you.
Good to have you.
So when we say Magnificent Seven, we're talking about Alphabet Amazon Apple Meta Microsoft, Nvidia and Tesla.
Why did you make that prediction about a year ago?
Well, the primary reason I made that prediction last year was because the level of market concentration around the Magnificent Seven, in terms of how much they represent of the overall equity indices, had reached such extreme levels from a historical perspective that simple historical pattern making would suggest that almost inevitably that was going to reverse.
And on top of that, it seemed to me that there was an awful lot of hype around and overexcitement about the degree to which some of the tangible fruits of the AI revolution would actually come in to boost these Magnificent Seven's earnings.
Yes, the technology is potentially revolutionary.
Yes, it's probably going to have a very big impact on the economy going forward.
But how quickly it's actually going to put some of these companies in the lead forever is not clear to my mind.
Yeah, I think we're definitely still grappling with a lot of those questions.
But let's run through what actually happened to these stocks.
Alphabet did go up more than 60%.
Nvidia was up more than 30%.
Tesla up around 20%.
But then the rest of the Mag 7 was up less than 20%.
And Amazon was actually only in the single digits.
Why do you think there was this divergence?
Well, to a certain extent, the recovery of Alphabet stemmed from the fact that it was seen to be losing the AI race 18 months ago.
You had upstarts like OpenAI suddenly seeming to take a lead.
And Alphabet has really come roaring back and shown that it does have a tremendous amount of research capability.
And even though it hasn't necessarily deployed all of its innovations as quickly as some of the others, a lot of that's due to it taking a more cautious some might say responsible stance to how it develops product.
So that's the story of Alphabet.
Some of the other ones, well, it's partly because...
Some of them leapt ahead earlier on and are now slowing down.
But the really important point to stress is that I think that, although many investors are still very excited about the AI and tech boom, there is the beginning of a much more discerning approach to working out which stocks are going to perform well and which aren't.
Because history shows it's very unlikely that they're all going to be winners.
Okay, so let's talk about your predictions for the MAG7 in 2026.
It sounds like, from what you're saying, that you're expecting to continue seeing this divergence in fortunes among the MAG7 stocks.
2026 is going to be shaped by a tension between the fact that, on the one hand, AI is a genuinely transformational technology and, as a result, the companies which emerge as winners will really emerge as winners in the future.
Just as we saw in the railway mania back 150 years ago that there were some big winners that came out of that.
There were also lots and lots of big losers though, and it's worth stressing that some investors lost a lot of money as a result, and I suspect that'll play out again.
But going forward in 2026, we know on the one hand there is this revolution in technology.
We know, on the other hand, that some American companies are absolutely global leaders and reinforcing their market dominance as we speak.
So that should propel stocks higher.
However, there are a number of factors that could provide real risks.
What are some of those risks?
One is a potential rise in interest rates, because increasingly the AI capex is being funded by debt, not just free cash flow or anything else.
Another potential risk is that there could be a political backlash against the AI companies Because, although President Trump has been very supportive in his own policymaking, what you're starting to see is a national populist like Steve Bannon, increasingly angry with what might be called the broligarchs, the elites who are shaping much of this discourse.
But the third and biggest issue in my mind is whether we're going to see new technologies or new platforms or new approaches to AI emerge in a way that could leapfrog the current framework that the Magnificent Seven are betting on.
And by that I mean most of the MagnetSense 7 are using proprietary technologies, but we're seeing in China open source AI approaches.
We're seeing all types of bootlegging approaches that are much cheaper and less energy guzzling.
That's incredibly important because America is critically short of the energy or need the electricity or need to power these data centers.
So any of those factors could potentially create quite a jolt for investors about their assumptions over who's going to win or lose.
Is there anything that could get all of the MAG7 stocks riding high again like they were in 2024?
Or are we just kind of past that point and not able to return to it?
I think it's hard to see a synchronized rise in all of the tech stocks going forward, because there is so much good news priced in.
However, the thing that would really boost the tech stocks is if it becomes clear that that non-tech companies are deploying AI and these new technological breakthroughs in a really meaningful way.
That's going to change the revenues.
Because one of the striking things thus far is that, for the most part, we don't have a lot of evidence of ordinary companies making dramatic productivity and revenue gains on the back of their deployment of tech.
Now, that may just be a time lag effect.
The other things that would help would be if there was a sign that America's getting serious about creating an energy policy that would address the shortfalls of energy around data centers.
Above all else.
That means getting the transmission lines and the grid sorted out, not so much just the actual energy generation.
But that's been very hard until now.
So if Washington gets serious about forcing a dramatic upgrade in the energy grid capacity, I think again that could make an impact as well.
Gillian, what do you think the change in fortunes of the MAG7 taught us about tech stocks or just the equities market as a whole?
So one lesson is that, you know, what goes up can sometimes come down.
We've seen that over and over again in history.
Another lesson though perhaps, is to go back to the railway mania of the late 19th century and remember that That mania did create railroads, which was an incredible technological breakthrough that we're all benefiting from today.
It made a few people rich, but it also made a lot of people big losers when the railway company Z-Bank went bust.
So bubbles can bring long-term benefits, but they can certainly cause short-term pain.
The problem is that no one really knows when they're going to pop.
Jillian Tett is a columnist and member of the FT editorial board.
Thanks, Jillian.
Thank you.
You can read more on 2025 and 2026 predictions when you click the links in our show notes.
This has been your daily FT News Briefing.
Check back next week for the latest business news.
The FT News Briefing was produced this week by Victoria Craig and me, Sonia Hudson.
Our show is edited by Mark Filippino.
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