The wild ride of the US tech giants has begun to falter. The ‘Magnificent Seven’ biggest companies – Microsoft, Apple, Alphabet, Amazon, Nvidia, Meta and Tesla – have all enjoyed spectacular growth over the last five years, but now they’re running out of steam. And into headwinds.

Part of the problem is their sheer size. When you’re collectively almost 35% of the market index, investors get nervous, as one bad quarter can send the whole exchange reeling, with drastic domino effects. It’s hard to avoid having all your eggs in one basket, when the best eggs are the entire basket!

The Magnificent Seven have also been victims of their own success, and inflated expectations. Market caps and share prices don’t reflect current reality; they’re always a measure of expectations, and future earnings. As Tesla discovered, you can only grow unit volumes by 50% per year for so long; then you hit diminishing returns and market saturation. Eventually you run out of new customers.

Constant innovation is the only way to keep charging ahead, and the US tech sector has outshone Europe and Asia in this regard. The big tech groups lead the field and have the financial muscle to invest in moonshots, putting the US in a league of its own. But innovation has its hurdles – think blockchain or metaverse. And no one is immune to global headwinds and geopolitical shocks.

The tech surge of recent years was fueled by artificial intelligence, and the hopes for exponential returns in terms of productivity, performance, and innovative spinoffs that AI would deliver, or enable. Which it has, to be fair. But AI has also disappointed, and so-called general AI or human-level intelligence seems a long way off, and maybe fraught with all sorts of issues. The AI boom has run its course.

As the Magnificent Seven stumble, we’re left to wonder: What will be the next big thing, and who will take the lead?