Amazon has officially slipped into a bear market, becoming the second member of the Mag7 to fall more than 20% from its recent high. After eight consecutive days of declines, the stock closed at $199.60 on December 12—down 21.4% from its peak—reflecting a sharp shift in investor sentiment toward Big Tech’s aggressive artificial intelligence spending plans.
The sell‑off underscores a broader rotation within the Mag7, where investors are increasingly distinguishing between companies with disciplined capital allocation and those pushing ahead with massive AI‑related investments. And right now, Amazon is on the wrong side of that divide.
Amazon's AI Spending Sparks Investor Pushback
Among the four major hyperscalers—Amazon, Microsoft, Meta, and Alphabet—Amazon is planning the largest capital expenditure in 2026, with spending expected to reach $200 billion. Collectively, the group is projected to pour $650 billion into AI infrastructure next year.
That number has become a lightning rod for investors who worry that the AI arms race is beginning to resemble the early stages of a capital‑intensive bubble. While Amazon Web Services (AWS) remains the company’s crown jewel, the scale of upcoming investment has raised questions about near‑term profitability and free‑cash‑flow stability.
The result: investors are voting with their feet.
Meta Could Be Next in Line
Meta is now just 2.3% away from its own bear‑market threshold. The company delivered strong fourth‑quarter results—beating Wall Street expectations on both revenue and earnings—but its rising AI spending and margin pressure have overshadowed the good news.
Meta’s situation mirrors Amazon’s: strong fundamentals, but a market increasingly unwilling to overlook ballooning capital expenditures.
Microsoft: The First Mag7 Member to Fall
Microsoft was the first Mag7 stock to enter a bear market this cycle. Its decline began on January 29, the day before Azure cloud growth came in below investor expectations. By December 12, Microsoft shares were down 25.9% from their recent high.
The company’s deep ties to OpenAI—once seen as a strategic advantage—have become a source of volatility. As investors reassess the economics of AI partnerships, Microsoft’s exposure has become a double‑edged sword.
Divergence Inside the Mag7: Not All Tech Giants Are Equal
Mike Treacy, VP of Risk at Apex Fintech Solutions, says the recent sell‑off highlights a growing divergence within the Mag7. Since last fall, investors have been pulling back from companies most closely tied to OpenAI‑related spending—Microsoft, Nvidia, and Oracle—and rotating toward ecosystems perceived as more balanced.
Alphabet and Broadcom have emerged as relative safe havens.
Alphabet: A More "Integrated" AI Strategy
Alphabet’s stock is down only 9.2% from its recent high, outperforming its peers. Treacy attributes this resilience to Alphabet’s vertically integrated technology stack, which helps offset concerns about overspending.
Alphabet’s approach to AI—building much of its infrastructure in‑house—has reassured investors that the company can scale efficiently without relying heavily on external partners.
Broadcom: Riding the AI Infrastructure Wave
Broadcom has benefited from strong demand for networking chips and custom accelerators, positioning it as a key supplier in the AI supply chain. Unlike hyperscalers, Broadcom isn’t footing the bill for massive data‑center expansions—it’s selling the picks and shovels.
Nvidia’s Earnings: The Next Big Catalyst
Treacy believes the next major turning point for AI‑related stocks will come on February 25, when Nvidia reports earnings. The results will offer the clearest signal yet on whether AI demand is cooling or whether Nvidia continues to capture enormous spending from its largest customers.
Nvidia’s report will also help investors determine whether the recent pullback in AI‑exposed stocks is:
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A temporary correction
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A deeper reassessment of AI economics
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Or the early stages of a broader rotation out of Big Tech
Given Nvidia’s outsized influence on the AI narrative, the earnings call could set the tone for the entire sector.
Why Amazon’s Decline Matters
Amazon’s entry into bear‑market territory is more than a technical milestone—it’s a sentiment shift. For years, Amazon has been viewed as one of the most durable growth stories in tech, with AWS providing a steady engine of high‑margin revenue.
But the current sell‑off suggests investors are no longer willing to give Big Tech a blank check for AI spending. The market wants clearer returns, tighter discipline, and more transparency around long‑term profitability.
Amazon’s challenge is balancing:
- Massive AI infrastructure investments
- AWS competitive pressures
- Retail margin improvements
- And shareholder expectations for cash‑flow growth
The company has navigated complex transitions before, but the scale of the AI build‑out makes this moment particularly consequential.
What Investors Should Watch Next
1. AWS Growth Trends
If AWS accelerates, it could offset concerns about capital expenditures.
2. AI Infrastructure ROI
Investors want evidence that AI spending will translate into revenue—not just capacity.
3. Meta’s Stock Trajectory
If Meta enters a bear market, it could signal a broader Mag7 correction.
4. Nvidia’s February 25 Earnings
This is the biggest near‑term catalyst for the entire AI ecosystem.
5. Rotation Toward Alphabet and Broadcom
If the trend continues, it may mark a structural shift in investor preferences.
Conclusion: The Mag7 Era Is Entering a New Phase
Amazon’s slide into a bear market marks a turning point for the Mag7. The group that powered markets for years is now facing a new reality: investors are no longer rewarding growth at any cost.
AI remains a transformative technology, but the market is demanding discipline, clearer returns, and more sustainable spending plans. As Amazon, Meta, and Microsoft struggle under the weight of their own ambitions, companies like Alphabet and Broadcom are emerging as relative winners.
The next few months—especially Nvidia’s earnings—will determine whether this is a temporary correction or the beginning of a deeper reshuffling within Big Tech.