The Other Seven…
→ The Magnificent Seven ETF is down 0.5% this year.
→ Small-cap ETFs are up 17–21%.
→ Morgan Stanley says the valuation gap between the market’s biggest winners and everyone else has shrunk to its smallest level in a decade.
The Magnificent Seven carried the market for years. Buying them was almost a cheat code. The largest tech companies did most of the heavy lifting while the rest of the market came along for the ride.
Now the passengers are driving, and…
→ Five of the seven are trailing the S&P 500.
→ Three are in the red for the year.
→ Meanwhile, an iShares ETF holding more than 1,100 small companies is quietly beating them all.
Here’s what’s changing—and whether this rotation has legs.⇩
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Did Elon Musk Just Open America’s Last Retirement Window?
Jeff Brown believes by the end of this month, this Elon Musk new AI breakthrough will collide…
With a powerful market prophecy that has correctly predicted some of the biggest market booms going back to 1950…
Giving Americans a rare and perhaps last chance to turn a small stake into an entire six-figure nest egg in the next 12-18 months.
The last time something like this happened, investors had a chance to turn a small stake of $10,000 into as much as $366,000 in just 14 months.
The Scoreboard — where each one stands.
The “Magnificent Seven” label hides a growing split.
✱ Apple (+16.5%) and Alphabet (about +15%) are outperforming the market.
✱ Microsoft (-23.3%) and Meta (-15.9%) are among the year’s biggest disappointments.
✱ Nvidia, Amazon, and Tesla sit in between, but all trail the S&P 500.
In short, buying the Mag 7 as a single trade isn’t working the way it used to.
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He Put Half His $9 Billion Into One Unusual AI Stock
One billionaire put over half his $9 billion fund into one unusual AI stock — then bought more shares nearly every day for 61 straight trading days.
It’s not Nvidia… a chipmaker… or a cloud giant.
Instead, it owns the assets the entire AI boom depends on…
And Trump signed emergency executive orders to protect them.
Right now it’s trading at a rare discount…
The same kind that’s previously turned $10,000 into $55,000. In just over 12 months
What Actually Beat The Market in 2026.
Small caps are having the year that Mag 7 was supposed to have.
The market rewarded concentration for a long time. In 2026, it’s rewarding the opposite.
Every major ETF designed to reduce the Magnificent Seven’s influence is outperforming the S&P 500.
→ Equal-weight is ahead.
→ Mid-caps are ahead.
→ Small-caps are leading by a wide margin.
In short, the diversification trade is back.
Owning more of the market is finally beating owning more of the biggest stocks.
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The Morgan Stanley Data.
✱ For most of the 2020s, investors were willing to pay a 30%+ premium for Mag 7 earnings relative to the rest of the S&P 500 — a reflection of the group’s superior growth, margins, and competitive moats.
That premium has now compressed to roughly 10%.
It is the most direct measure of what has changed: the market is no longer willing to pay as much for Mag 7 earnings relative to alternatives as it was a year ago.
The group has not gotten worse. The alternatives have gotten cheaper — and the capex story has made investors reconsider the premium.
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He predicted the 2008 financial crisis…
He predicted Trump’s election in 2016….
He even predicted the rise of COVID-19 writing:
“The chance we don’t have something on the scale of a national pandemic in the next few years is near zero”
That was three months before the first reported case.
If he’s right again, God Bless America…
Because this crisis will be tectonic in scale…and it’s going to begin with the bubble popping in AI.
The reason — AI capex is eating the cash flow investors loved.
AI capital expenditures are expected to jump roughly 70% this year, topping $700 billion, with most of that investment coming from the largest hyperscalers. The goal is to build the infrastructure for the next decade of AI.
The trade-off is that today’s spending comes at the expense of today’s cash flow.
The group’s projected 12-month free cash flow is expected to fall sharply from its 2024 peak. Free cash flow is what funds buybacks, dividends, acquisitions, and the steady compounding that made the Magnificent Seven such attractive investments.
As Deutsche Bank strategist Jim Reid put it, investors are showing “growing apprehension” about the scale of AI spending by the largest hyperscalers.
Higher interest rates only add to the pressure. If borrowing costs rise, financing massive AI projects becomes more expensive, making investors even less willing to pay premium valuations today for profits that may not arrive until years from now.
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Who Is Winning?
The biggest winners in 2026 are… the chip suppliers.
✱ The Nvidia Paradox
Nvidia is the AI chip leader inside the Magnificent Seven. Yet in 2026, it has lagged much of the semiconductor industry.
Broadcom—another AI heavyweight that began the year among the S&P 500’s 10 largest companies—has also trailed many of its peers.
Instead, the biggest winners have come from less obvious corners of the AI supply chain.→ Memory makers like Micron, equipment suppliers like Applied Materials, and even Intel and AMD have delivered stronger returns.
Why Small Caps?
✱ One reason the Russell 2000 Growth ETF has outperformed is what it doesn’t own.
Its largest sector is healthcare, not technology. Industrials and financials together are bigger than tech, making the fund genuinely diversified rather than another version of the AI trade.
The market’s winning small-cap fund isn’t benefiting from AI capex. It’s benefiting from being largely insulated from it.
The Real Question
The Magnificent Seven didn’t dominate by accident.
They earned premium valuations through
→ faster growth,
→ wider margins,
→ sticky ecosystems, and
→ businesses that consistently generated enormous amounts of cash.
One year of underperformance doesn’t erase that. Even after this year’s stumble, the Mag 7 ETF has returned 29.7% annually over the past three years, compared with 18.3% for the Russell 2000 Growth ETF.
What changed in 2026 is more specific.
AI infrastructure spending exploded, eating into the free cash flow investors once prized. As those cash flows came under pressure, the market stopped paying the same premium it once did for every dollar of Mag 7 earnings.
→ If those billions of dollars invested in AI translate into faster cloud growth, new AI services, and higher profits, today’s valuation discount could prove temporary.
→ If they don’t, the market may continue rewarding companies that can grow without spending quite so aggressively.
That debate extends beyond Big Tech.
Fidelity argues U.S. small caps remain undervalued relative to large caps and could outperform over the next five to ten years—a structural case rather than a cyclical one.
And the market has already started voting.
Don’t forget to cast your vote 👇
Lesson Of The Day:
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