Morgan Stanley data shows the group’s P/E premium to the S&P 500 has shrunk to around 10%, down from over 30% earlier this decade.
The Magnificent Seven tech stocks now trade at their cheapest valuation relative to the S&P 500 since before 2014. Their price-to-earnings multiple premium has collapsed to roughly 10%, a sharp decline from the 30%+ levels maintained through most of the 2020s.
All but one of the seven—Alphabet—have underperformed the S&P 500 in 2026. The index is up 8.8% year-to-date, while Alphabet has gained 14.5%. The group’s collective forward free cash flow is projected to drop from its 2024 peak amid surging capital expenditures.
Investors are growing wary of Big Tech’s $700 billion AI spending spree, which has pressured cash generation. Concerns about a potential Fed rate hike later this year have also weighed on sentiment.