Mag Seven Splits Over AI Returns: Amazon and Microsoft Surge

Amazon and Microsoft have emerged as the clear winners from the recent 'Magnificent Seven' earnings season. The two tech giants saw their shares surge, with Amazon's jumping more than 15% on Friday and Microsoft posting its best week since 1999.

The split among the Mag Seven, comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, is becoming increasingly evident as investors demand a 'higher burden of proof' for AI investments. This trend was highlighted by Morningstar analyst Malik Ahmed Khan, who noted that Amazon CEO Andy Jassy made a strong case for AI data center ROI.

Amazon's AWS revenue jumped 37% to $42.2 billion, its fastest growth since 2021, while Microsoft saw Azure growth accelerate to about 43%. The strong performance of these two companies has put pressure on other members of the Mag Seven, with Meta and Apple facing questions over their capital spending plans.

Alphabet initially dropped 7% after earnings but rebounded after Amazon's results strengthened the case for its own $195 billion to $205 billion spending plan. Tesla also shed about $7 billion after reporting negative cash flow and forecasting higher spending.