Why some of the biggest tech investors are moving away from the Mag 7

The Magnificent Seven, a collection of the biggest US technology firms, have been a key feature of global equity funds for the better part of the decade. This is in part because their market dominance demanded a place, and high returns made it hard to argue against holding them.

Made up of Meta, Alphabet, Amazon and Apple joined by Microsoft, Nvidia and Tesla this small group of companies make up more than a third of the S&P 500 index and have driven more than 50% of the entire market’s returns for the past several years.

Indeed, such is the dominance of these few companies in both size and performance that US equities are often divided into this handful of stocks and what’s become known colloquially as the ‘S&P 493’.

A noticeable shift away from a matching the index’s Mag 7 exposure  

But the tide appears to have shifted with the entrance of AI as the next era of the technology trade, and some of the most longstanding technology fund managers have made a deliberate move away from some of the cohort.

Allianz Technology and Polar Capital Technology are the two biggest trusts dedicated to technology stocks and have both taken very deliberate underweights to the Mag 7, meaning they have a lower holding of them relative to the indices against which their performance is benchmarked.

In its latest full-year results for 2025, the £2 billion Allianz Technology trust manager Mike Seidenberg mulled whether the Magnificent Seven has “relinquished its grip on market leadership”.

The trust has consistently maintained an underweight position in the Mag 7 during 2023–2025, prioritising risk management over high concentration.

According to Seidenberg, 2025 was a “more complex year for the Magnificent 7 companies, with real concerns over the level of spending and whether they would see returns on their commitments”.

Microsoft, Meta, Alphabet and Amazon are expected to spend a combined $350 billion into their respective AI build outs and across the board markets have become increasingly concerned about how and when these strategies will start to bear fruit as competition to be the AI winners increases.  

Seidenberg says that Alphabet – the parent company of Google – managed to convince investors that its capital allocation was proving effective. This list of investors which had been won over included himself as Alphabet is the second highest position in the trust.

Meanwhile, “the jury was out for Meta and Apple”, Seidenberg observes, although Apple remains a top 10 holding.

The £6.2 billion Polar Capital Technology trust takes an equally deliberate view regarding the Magnificent 7, with manager Ben Rogoff telling AJ Bell that the trust has “never been  more underweight” than it is today with 27% in the Mag 7.

Like Allianz, Polar holds Alphabet in its top 10, along with Microsoft, Apple and Meta. Both have Nvidia as their biggest investment, as each manager treats it as a slightly separate case study. Seeing it more as an infrastructure beneficiary of the AI-build out thanks to its in-demand semi-conductor chips providing the tech for the ‘hyperscalers’ which are racing to build their own model programmes.

Polar’s Rogoff took over the trust in 2006, at which time the Mag 7 didn’t even exist, even the FAANGs term encompassing - Facebook (now Meta), Apple, Amazon, Netflix, and Google (Alphabet) - hadn’t yet been coined.

In this first stage of the ‘digital world’, defined by the emergence of the smartphone virtually every tech and equity fund held this collection of companies as they emerged “as a monopoly” Rogoff says, which continued with the reshuffle into the Mag 7 as these companies were equally “non fungible” he explains. Or in other words, they are businesses with unique attributes which cannot be replicated elsewhere.

Rogoff said that he pivoted the Polar trust three years ago towards AI as its biggest theme which warranted a reshuffle of the ‘obvious’ holdings.

“Because everything gets reordered ... and therefore we wanted our portfolios to reflect that in the first few years of the AI cycle story,” he says.

Both Allianz and Polar have highlighted a strong source of their returns have been driven not so much by the companies spending the money to build the AI-space, but rather the ones that are having that money spent on them instead.

Investors have already had a taste of how painful the changing of the guard can be when it comes to sorting the AI winners from the losers. Last month, ChatGPT rival Claude unveiled an AI legal services tool, triggering the ‘SaaSpocalypse’ which saw $1 trillion being wiped off the market as investors changed their view of the outlook for several data and software companies.

Back in 2025, the Mag 7 were directly challenged with the arrival of Chinese firm DeepSeek, which had developed its AI model at what it said was a much lower cost.

Managers like some but not all of the Mag 7

What has changed now is not that the tech managers have an aversion to the entire Mag 7. Instead the AI trend has changed the outlook on which of them will be the winners of this next era.

“Think about the film the Magnificent 7, not all of them are alive at the end of the movie,” Rogoff says.

“That isn’t to say that I think the Mag 7 are ‘dead’...these are seriously good businesses and led by some of the most brilliant people...rather, as conduits to get to the AI exposure we think some of them are less attractive.”