Lo Toney, founding managing partner of Plexo Capital, argues that the 'Magnificent Seven' stocks are no longer a single trade. He identifies three distinct groups based on their relationship with AI: hyperscalers, AI integrators, and physical AI implementers.
Google, Microsoft, and Amazon are categorized as hyperscalers building massive data centers. These companies must still demonstrate that their significant AI investments are translating into tangible profits.
Meta and Apple are viewed as companies that use AI to enhance existing advertising and hardware franchises rather than treating AI as a standalone business model.
Tesla is described as a separate case, focusing on turning AI into physical products and services, which brings specific regulatory and profitability challenges.
Nvidia stands apart as a chipmaker that profits while its customers test AI economics. The company expanded its software presence by agreeing on September 3 to acquire the open-source AI platform Hugging Face for approximately $12.9 billion.
Toney identifies Alphabet's Google as his top pick due to its ownership of data centers and custom chips, and its ability to monetize AI across Search, YouTube, Cloud, and Waymo. Google shares have risen roughly 42% over the last 12 months, with a Wall Street consensus target suggesting about 25% more upside.
