'Magnificent 7' Stocks Face New Scrutiny Amid Shift to FCF Focus

The 'Magnificent 7', Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla, have been dominating the US stock market due to their significant investments in artificial intelligence (AI). However, investors are now looking beyond capital expenditure (CAPEX) and focusing on Free Cash Flow (FCF) as a key indicator of a company's future prospects.

Microsoft has emerged as a top performer, recording an 'earnings surprise' with sales of $907 billion in the fourth quarter of fiscal 2026, up 18% year-on-year. Azure sales surged 43%, exceeding annual sales of $100 billion.

Amazon is also considered a winner, with sales reaching USD 2006 billion in the second quarter of this year, up 20% year-on-year. Amazon Web Services (AWS) sales grew 37% year-on-year, with AWS growth being the highest in the last 18 quarters.

Magnificent 7 members Meta and Alphabet are increasing their sales but are facing concerns about the sustainability of pouring enormous cash into AI investments. Their stock prices have declined following the announcement of their second-quarter earnings.