"The central question hanging over XLK and MAGS is whether the massive AI infrastructure spending by the Magnificent Seven companies will eventually translate into earnings growth, or whether it will keep compressing free cash flow without a clear payoff timeline."
"While these companies are making massive AI investments, the market is skeptical until there's clearer visibility on returns."
"The stocks' consistent scale, durability, and growth reinforce their importance as the center of U.S. economic growth and profitability."
In 2026, the Technology Select Sector SPDR Fund (XLK) and Roundhill Magnificent Seven ETF (MAGS) have struggled due to investor impatience with AI spending timelines, with XLK down 4% and MAGS nearly 10%. In contrast, the WisdomTree Cybersecurity Fund (WCBR) has posted modest gains. XLK's performance is heavily influenced by its top holdings, which include Nvidia, Apple, and Microsoft. The market remains skeptical about the returns on massive AI investments, while some argue that these investments will eventually lead to sustained growth.
Read at 24/7 Wall St.
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