Apple(US:AAPL) The Guardianยท2024-08-03 08:00Magnificent Seven Performance and AI Investment Concerns - The Magnificent Seven (Microsoft, Amazon, Apple, Nvidia, Alphabet, Meta, Tesla) accounted for half the gains in the S&P 500 last year but have entered correction territory, with combined share prices falling over 10% since their peak on 10 July [1] - Concerns about the return on AI investments, mixed quarterly results, and weak US economic data have contributed to the decline [1] - The group has been hit by doubts over whether the $1tn investment in AI over the next few years will pay off, with estimates suggesting tech companies need to earn $600bn to cover AI investments [2] Sector Rotation and Market Impact - Investor expectations of a Federal Reserve rate cut have shifted focus to smaller businesses, banks, and real estate firms, leading to sector rotation [3] - The concentration of the Magnificent Seven in the S&P 500 means their performance significantly impacts the broader market [3] Quarterly Results and Valuations - Microsoft's cloud computing division reported lower-than-expected growth, while Amazon's cloud growth was offset by higher AI infrastructure spending [4] - Meta's shares rose due to strong revenue growth, and Apple beat sales expectations [4] - Tech valuations reached 20-year highs, leading to a market pullback [6] AI Breakthroughs and Revenue Challenges - More AI breakthroughs are expected, with companies like Google DeepMind setting new records in AI performance [7] - The cost of frontier AI training runs has increased tenfold annually, raising questions about long-term financing for even well-capitalized companies like OpenAI [8] - Generative AI has seen bottom-up success in improving efficiency, but corporate-level success stories remain limited [9][10]