Microsoft has been hit hardest by the drawdown, falling roughly 32% from its October peak, on track for its worst start to a year in its history. Meta is down about 25%, and Alphabet roughly 15% from its closing high last month. Even the darling of the AI trade, Nvidia, and high-performing Amazon are negative on the year. A Bloomberg index tracking the seven said it had entered correction territory in mid-March, closing more than 10% below its October record.

The selloff marks a sharp reversal from years of AI-fueled gains: The index rose 107% in 2023, 67% in 2024, and 25% in 2025. Multiple forces are now working against the group simultaneously. Oil prices have surged since Operation Epic Fury began Feb. 28, reigniting inflation expectations and shifting the interest rate outlook. Markets now price in a greater chance of rate hikes by year-end than cuts, according to CME’s FedWatch tool, removing what had been a key pillar of the bull case for growth stocks.

At the same time, the excitement around AI infrastructure spending has waned, and now the market seems more spooked by it than enticed. Still, combined capital expenditures for Google, Microsoft, Amazon, and Meta are expected to exceed $650 billion in 2026, an increase of about 60% from 2025. Institutional money, meanwhile, has rotated out of these Big Tech stocks and into energy, industrials and domestic manufacturing.

Some of the quick compression in value has drawn comparisons to the dotcom bust. Capital Economics wrote in a note on Friday that the S&P 500’s IT sector has converged with the valuations of the rest of the index, a pattern that matched the final months of the 2000s bubble. 

Still, Capital Economics believes that earnings estimates for the stocks, even as prices have fallen, should give pause to too many ominous comparisons.

While the firm warned that a prolonged conflict could ultimately push the S&P 500 down to 6,000, its baseline view is that the AI build-out won’t be derailed by the war, and that a recovery in valuations will eventually put U.S. stocks back on top later this year.

“That tech outperformance, alongside the fact that the U.S. economy looks less exposed to the conflict than most, informs our view that U.S. equities will continue faring better than their peers,” senior markets economist James Reilly wrote. 

Several controversies have also slammed the Mag Seven in recent days. Microsoft’s Copilot AI product has been described as a disappointment by UBS. Meta just lost a landmark trial on social media addiction. And many of these companies’ AI dreams are tied up in OpenAI, which just exited a massive deal with Disney meant to secure its place in Hollywood. 

Some investors see opportunities where there is wreckage. Robert Edwards, chief investment officer at Edwards Asset Management, argued that Big Tech earnings yields now resemble Treasury yields, and that the group’s strong balance sheets and real earnings growth make them attractive at current levels.

“Big Tech is where valuations are reasonable, where you have real growth,” Edwards said.

But there’s a reason dip-buyers aren’t jumping in during the drawdown. In fact, the Nasdaq tumbled 2% on Friday, despite President Donald Trump further delaying his threat to attack Iran’s energy infrastructure.

The war has introduced uncertainty that traditional valuation frameworks can’t fully price, and the Hormuz blockade has renewed focus on other potential vulnerabilities for the U.S.—including in Taiwan, where no strategic semiconductor reserve exists.  

Investors seem to have tired of his flip-flopping rhetoric on the war, and have started paying attention instead to the signal of Israel continuing to strike Iran, and vice versa. As of this writing, Iran still has complete control over the Strait of Hormuz, through which 20% of the world’s oil is transported, and is considering adding a toll for ships to pass through the strait.