TheChek News Flow

The AI race is splintering big tech names, with investors pointing to a divergence in business approach and stock performance

The “Magnificent Seven” stocks are diverging, especially in AI, affecting their stock performance.

Nvidia, Meta and Microsoft have gained, while Apple, Tesla and Alphabet have lagged behind.

Investors are watching second-quarter results closely to see if AI investments justify high valuations.

The “Magnificent Seven” stocks are starting to grow apart.

They are not quite heading to splitsville, but some of the market’s tech heavyweights have made more headway in artificial intelligence—and that has put a strain on their relationship. At least with respect to their recent relative stock performance.

“They are in therapy,” said Dan Morgan, senior portfolio manager at Synovus Trust, of the Magnificent Seven’s diverging paths.

Amazon.com, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia and Tesla have lorded over the stock market in recent years, linked by the outsize role they share in the economy’s future and the significant slice they comprise in the benchmark S&P 500 index.

This year, though, shares of Nvidia, Meta and Microsoft have climbed about 20% or more, while Apple and Alphabet are down 16% and 2%, respectively. Each will soon deliver a quarterly scorecard to investors, with Alphabet and Tesla set to report earnings Wednesday, followed by Meta, Microsoft and Apple the following week.

“It was inevitable. They all can’t run in lockstep forever because they do different things,” said Jamie Cox, managing partner at Harris Financial Group. “Now, the winners and losers stratification is upon us.”

The Magnificent Seven still have a strong grip over the market. Their stocks led the tariff-induced selloff in April, and then helped lift the market all the way back during its march toward new highs. Those big names represent about 35% of the S&P 500, according to Dow Jones Market Data, and investors don’t expect that to change soon.

One major reason the seven were grouped together in the first place was that those seven companies were spearheading the AI push, Michael Hartnett, the Bank of America strategist who is credited with coining the term “Magnificent Seven” in 2023, has said.

But “right now, we’re seeing a pretty big divergence in the fundamentals,” said Ivana Delevska, founder and chief investment officer of Spear.

Apple, for instance, has failed to woo investors with its AI efforts. Last year, it introduced its Apple Intelligence service to great fanfare, only to come up short on its promises. The company has said it would share updates about its AI-powered Siri in the coming year, meaning it might not reach the market until late 2026.

Morgan, of Synovus, said he recently trimmed his Apple holdings for the first time in years. When a client was looking to make a donation, he recommended gifting Apple equities, something he wouldn’t have done years ago. Other investors have reduced Apple positions in favor of Nvidia or Microsoft.

“Apple is on a park bench eating an apple, watching the AI revolution go by on the highway,” said Dan Ives, managing director of Wedbush Securities and one of Wall Street’s biggest AI bulls.

Google’s parent company, Alphabet, faces antitrust scrutiny in the U.S. and Europe, along with mounting concern that AI chatbots such as ChatGPT will eat into Google’s dominant search business.

Some investors see plenty of upside potential. Google has a significant trove of user data available, something analysts say could help advance its AI models beyond competitors. Its AI overviews, which appear atop some search-results pages, are gaining traction, as are its Gemini AI tools.

“We believe that the perceived ‘missteps’ in AI with Google will correct and that Google will figure this all out,” wrote Jeff McClean, chief executive officer of Solidarity Wealth.

Tesla, a ticker long beloved by individual investors, has diverged from its Magnificent Seven counterparts for very different reasons, including flagging electric-vehicle sales and Elon Musk’s foray into politics. Musk has pushed to transform Tesla, down 18% this year, from an EV maker into a robotics and artificial-intelligence company. The CEO recently said Tesla shareholders would vote on investing in xAI, one of his other companies.

“In the Mag Seven, there’s the cool kids table—and Apple, Tesla and Alphabet, they’re by the kitchen at the bad table, wishing they were at the cool kids table,” Ives said.

The other half of the tech-stock group has continued to reap the rewards of AI optimism. The chip giant Nvidia has been the clearest winner in the AI race thus far. The world’s first $4 trillion company has split off from the Magnificent Seven more than any other. Its stock has more than tripled in the past two years.

Meta and Microsoft are well-positioned too, investors said. Amazon, whose shares are up 3% year to date, has been affected by tariffs and the uncertainty regarding them. The company has invested in the AI startup Anthropic.

Wall Street will be parsing second-quarter results for indications that these large tech companies are continuing to invest big in artificial intelligence. That is important given lofty valuations: Six of those seven companies recently traded at more than 25 times their expected earnings over the next year, compared with an S&P 500 average of 22.35. Alphabet was the only one below that bar.

“Earnings are going to have to be really spectacular to push these stocks significantly forward from here,” said Cox of Harris Financial. “I don’t know if that’s possible.”

In the second quarter, the Magnificent Seven are expecting 14% year-over-year net-income growth, significantly outpacing the 3% decline expected for the other 493 companies in the S&P index, according to a recent report from Morgan Stanley.

Given that all seven companies have strong exposure to AI, or enough capital to make acquisitions and catch up, it is possible this divergence is temporary, according to some investors.

“The Mag Seven friends could reunite at the party over the next year, but it all depends on how they navigate the AI revolution,” said Ives, the Wedbush managing director.

The previous era was defined by FAANG—Facebook’s parent, Meta; Amazon; Apple; Netflix; and Google’s owner, Alphabet—until that group fizzled in 2023. If these companies’ stocks continue heading in wildly different directions, that might leave the door open for a newly named group of hot stocks—and the Magnificent Seven could go the way of FAANG or the Nifty Fifty.

Some investors are already wondering about what moniker will be next.

Tsunami warning after 2 large quakes off Russia's Pacific coast

MOSCOW (AP) — The Pacific Tsunami Warning Center has issued a threat forecast for Russia's Kamchatka Peninsula after two quakes — the larger with a magnitude of 7.4 — struck in the sea nearby on Sunday.

The larger quake was at a depth of 20 kilometers (12 miles) and was 144 kilometers (89 miles) east of the city of Petropavlovsk-Kamchatsky, which has a population of 180,000, according to the U.S. Geological Survey.

A few minutes earlier, a quake with a magnitude of 6.7 was recorded nearby.

The PTWC initially said there was a danger of major tsunami waves but later downgraded its warning to say that waves of up to a meter (3.3 feet) could occur.

Russia's Emergencies Ministry also issued a tsunami warning following the second quake, urging residents of coastal settlements to stay away from the shore.

There were no immediate reports of casualties.

On Nov. 4, 1952, a magnitude 9.0 quake in Kamchatka caused damage but no reported deaths despite setting off 9.1-meter (30-foot) waves in Hawaii.

World’s largest copper producer says Trump’s tariffs are causing ‘anxiety’

Codelco’s chair says he does not understand what the US wants to achieve with levies on the metal

The world’s largest copper producer says US tariffs are causing anxiety as the $250bn industry awaits details of proposed levies on the metal less than two weeks before they are due to kick in.

President Donald Trump this month said he would impose a 50 per cent tariff on copper from August 1 but did not clarify if this would apply to the refined metal, semi-finished products or copper ore. Miners and industrial users have questions over the timing and nature of the tariffs.

Máximo Pacheco, chair of Codelco, a state-owned Chilean copper miner and a major supplier to the US, said the uncertainty was difficult to manage.

“Our customers have some anxiety and they need to understand where all this will end,” he told the Financial Times in an interview. Free trade “is valuable for both parties”, and Chile was happy to supply the US with more refined copper to support domestic manufacturing, he added.

Executives have raised concerns about the planned tariffs on the metal, and analysts have warned they will threaten key US industries from electric vehicles to data centres and defence.

Chile has a trade agreement with the US and accounts for more than 60 per cent of American imports of refined copper.

“If the US really wants to develop more manufacturing of copper products, it is clear to us that they will need more copper cathodes,” Pacheco said, referring to a type of refined metal that can be used to make products such as wires and rods.

While the US produces some copper ore, it does not have enough smelting capacity to refine all the material that it consumes. It would be very difficult to quickly replace the imported refined metal with domestic production because smelters typically take several years to build.

The threat of levies also comes as the copper industry globally is struggling to boost mine supply, amid declining ore grades and rising costs that make it expensive to develop new mines.

For Codelco the US accounts for 11 per cent of cathode sales.

“We don’t fully understand what it is that the US is trying to achieve with this announcement,” Pacheco said.

Analysts have questioned whether the White House will reduce the level of the copper tariffs, or make exemptions that lessen their impact. The US has walked back on several tariff initiatives, leading to the so-called “Taco” trade in markets, an acronym for “Trump always chickens out”.

One possibility is the US might impose levies on semi-finished products such as wires, tubes and strips but allow refined copper to enter without additional tariffs.

“If the [copper] tariffs go into effect, the domino effect on end users — such as data centres and the automotive sector — will be very strong,” said Gracelin Baskaran, director of the critical minerals security programme at the Center for Strategic and International Studies in Washington.

“Once the domestic industry feels the impact of tariffs they will very likely be revisited, because it threatens our [US] growth agenda,” she added.

Czech Eurosceptic frontrunner vows to defy 5% Nato spending target

Andrej Babiš would join Spain in resisting defence spending rise if elected in October

The frontrunner in the Czech election intends to break Prague’s pledge to raise defence spending to 5 per cent of GDP if he wins office, joining Spain in rejecting the target demanded by US President Donald Trump.

Billionaire former premier Andrej Babiš, whose Eurosceptic ANO opposition party is leading polls ahead of October’s parliamentary elections, told the Financial Times that he remained an admirer of Trump but he wanted to prioritise domestic social spending.

“I’m a politician working for the Czech people and we are not subordinates, and maybe somebody has to explain to Mr Trump that 5 per cent is not realistic,” he said in an interview. “If Trump says that I have to jump from the window, I will not jump.’’

The warning from Babiš, who has sparred with Brussels and questioned the EU’s continued support for Kyiv, could add strain to Nato and EU efforts to preserve unity on defence, as the bloc re-arms in response to Russian aggression and Trump’s demands.

Babiš — whose party sits in a group with France’s far-right leader Marine Le Pen and Hungarian Prime Minister Viktor Orbán in the European parliament — said that President Vladimir Putin made a “big mistake” by attacking Ukraine, but that the Russian threat is overblown.

“I’m really not afraid of Putin, because we are already strong,” he said. “Are we saying that Putin who has a military budget 13 times smaller than Nato can do something against us, when he is luckily not even capable of moving 1km forward in Ukraine?”

Russian forces in eastern Ukraine have been advancing at the fastest rate since November in recent weeks. Babiš said if he wins the election, he would not supply more aircraft and weapons for Ukraine and would halt a Czech-led initiative to purchase ammunition from third countries for Kyiv.

That stance has helped current premier Petr Fiala to portray the election as a choice between keeping Prague anchored within the EU and Nato, or allowing his opponent to side instead with pro-Russia governments in Hungary and Slovakia. Babiš “helps Vladimir Putin, it’s very clear”, Fiala told the FT earlier this year.

“To say that I’m helping Putin is a real lie. I never spoke with Putin, I never went to Russia as a politician but Fiala is now building this campaign about me being pro-Russian,” Babiš responded.

Fiala agreed with Nato allies last month to more than double defence spending from the current 2 per cent target. If Babiš wins the election and overturns that decision, the Czech Republic would be the second holdout after Spanish Prime Minister Pedro Sánchez, who opted out saying that he wanted to protect the welfare state.

Prague had debt equivalent to 43 per cent of GDP at the end of last year, about half the EU average of 81 per cent, according to Eurostat.

The former Czech prime minister argued taxpayers’ money could be better spent than on building weapons stockpiles. “The world is now spending record amounts on arms but the word that is written nine times in the charter of Nato is peace,” he said. “Pedro Sánchez is telling the truth by saying that he needs money for the social system.”

Babiš entered politics in 2011, launching ANO after building a business empire stretching from food to fertilisers. He became prime minister in 2017, but was ousted in 2021 after four years in power when Fiala’s Civic Democratic party managed to form a coalition to keep him out of government.

During his time in office he adopted a defiant stance towards Brussels, particularly after the European Commission demanded the reimbursement of EU funds received by his business Agrofert. A Czech high court last month overturned his previous acquittal to reopen a fraud trial related to EU subsidies. Babiš denies wrongdoing and called the case “nonsense”, invented by his political opponents.

Fiala’s party has been trailing behind in the polls amid internal feuding that prompted one of his coalition partners to abandon the government in October. Last month he survived a parliamentary vote triggered by a bitcoin scandal that forced his justice minister to resign.

CVC Capital Partners explores refinancing of its sporting portfolio

Goldman Sachs, PJT Partners and Raine Group picked to manage a plan to borrow against assets valued at £9bn

CVC Capital Partners is exploring a potential refinancing of its sporting portfolio that would value a collection of assets ranging from English rugby and women’s tennis to Indian cricket and Spanish football at more than £9bn. 

The Amsterdam-listed firm has long been one of the most active private equity players in the world of sport, beginning in the late 1990s when it pushed into motorsport by buying MotoGP. It later owned Formula 1, which became one of its most profitable investments when it sold it to Liberty Media in 2016 for more than $8bn. 

CVC’s current holdings include stakes in the commercial operations of Six Nations Rugby, the Women’s Tennis Association and volleyball’s global governing body. It also has a minority stake in the Gujarat Titans cricket franchise, and paid €3.5bn for a share in the broadcast and sponsorship income of the Spanish and French football leagues.  

The firm has picked Goldman Sachs, PJT Partners and Raine Group to manage a plan to borrow against the combined assets, which will be brought together in a new entity dubbed SportsCo valued at more than £9bn, according to a person familiar with the matter.

While the different portfolio companies will remain independent, CVC hopes to bring more cohesion to its various sports properties, the person added, such as through sharing best practice and seeking joint opportunities.

CVC declined to comment. News of the refinancing plan was first reported by Sky News.

Sport has been attracting growing interest from private equity firms keen to gain exposure to rising income streams from broadcast and sponsorship.

Team valuations in many sports have also been climbing rapidly. Last month the owners of the LA Lakers agreed to sell the basketball franchise for $10bn, a new record for the sports industry.

While CVC was an early mover, several US-based firms including Ares Management, Sixth Street, Silver Lake, RedBird and Arctos have invested billions in the sector in recent years. 

Some of the assets in CVC’s portfolio have faced a bumpy few years. Premiership Rugby, the top tier of English professional rugby union, suffered a financial crisis during the pandemic, which resulted in three of its then 13 clubs going bust. However, league executives believe the competition has turned a corner and is set to grow in the coming years. 

The French football league has also endured a challenging 18 months after a botched broadcast rights auction led to a steep drop in TV income. It is now planning to launch its own streaming service to offer live matches direct to consumers, and is discussing a possible overhaul of its governance structure.