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Mag-7 stocks fell by 6.7% in Feb26 (Jan26: +0.2%), underperforming both the S&P 500 (-1.4%) and NASDAQ (-3.8%). The decline came from a broader market reassessment of aggressive AI capital expenditures versus near-term ROI.
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Majority of the MAG7 pulled back in Feb26 as MSFT (-18.4%) was weighed down by growing market scepticism regarding the profitability and payoff timeline of its heavy AI infrastructure build-out, and AMZN (-13.8%) was sold following its announcement to sacrifice short-term margins for a US$200bn long-term AI hardware bet. TSLA (+5.4%) was the biggest gainer from a recovery in China and European vehicle sales.
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We maintain OVERWEIGHT on the Mag-7. The Feb26 pullback, triggered by the Iran conflict and renewed inflation fears, presents an attractive entry point. While energy shocks cement a higher-for-longer rate environment, the Mag-7 remain insulated. Their net cash balance sheets and robust free cash flow effectively neutralise elevated borrowing costs. Secular AI adoption and sovereign tech investments outweigh duration risk. Excluding TSLA, Mag-7 earnings will continue to outpace the S&P 500 and Nasdaq 100, anchored by non-cyclical demand and the US AI Action Plan.
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