Two of tech’s most dominant companies just hit a milestone investors hoped to avoid. Amazon (NASDAQ:AMZN | AMZN Price Prediction) and Microsoft (NASDAQ:MSFT) have both officially entered bear market territory, down more than 20% from their recent peaks. When the giants stumble, the entire market feels it.
The Damage Report
Amazon closed at $199.60 on February 12th, down 13.5% year-to-date and 17.7% over the past month. The stock peaked at $258.60 within the last 52 weeks, meaning it has fallen roughly 23% from that high. The decline accelerated sharply in early February, with the stock’s RSI dropping to 23.46, deep into oversold territory and the lowest reading since the 2022 bear market.
Microsoft’s trajectory tells a similar story. The stock closed at $401.84, down 16.9% year-to-date and 14.6% over the past month. With a 52-week high of $553.50, Microsoft has shed 27% from its peak. Its RSI sits at 32.55, also in oversold territory after dropping from 56.08 on January 28.
What’s Breaking the Mag 7?
The culprit isn’t earnings misses. Amazon met Q4 2025 estimates exactly at $1.95 per share, breaking a three-quarter streak of 16% to 26% beats. Microsoft crushed expectations with $4.14 EPS versus $3.91 estimated. Yet both stocks sold off anyway.
The real issue is capital expenditure. Big Tech is projected to spend nearly $700 billion on AI-driven infrastructure, and investors are questioning the return. Microsoft’s capex rose 66% year-over-year to $37.5 billion, far outpacing Azure’s 38% revenue growth. Amazon announced a $200 billion capex plan for 2026, raising concerns about free cash flow conversion.
Further, Microsoft is stuck in a prisoner’s dilemma where Wall Street is looking for stronger Azure growth, but its compute constrained and needs to allocate supply to its internal products. Amazon’s spending level brings up questions of why AWS isn’t growing more. The company will face expectations of increasing growth rates from around 20% today to the high-20% range by the end of 2026.
Analysts are turning cautious. Zacks rates Amazon as Hold, citing “premium valuation relative to competitors” and “aggressive spending outpacing AWS growth.” Microsoft earned a Somewhat-Bearish rating due to “high capital expenditure guidance for AI and cloud infrastructure” pressuring profitability.
The Broader Mag 7 Picture
The weakness isn’t isolated. Alphabet (NASDAQ:GOOGL) is down 8% over the past month. Tesla (NASDAQ:TSLA) has fallen 6.7% in the past month and 7.3% year-to-date. Apple (NASDAQ:AAPL) is down 3.6% year-to-date.
Only Nvidia (NASDAQ:NVDA) and Meta (NASDAQ:META) are holding up, essentially flat year-to-date. The Nasdaq-100 is down 2.2% year-to-date and 4.1% over the past month, reflecting the concentration risk. The Mag 7 represents 33.4% of QQQ’s portfolio, with tech and communication services accounting for 65.4% of the index.
Still, its surprising no stocks are winning. That is to say, if Wall Street is selling hyperscalers off on spending concerns, shouldn’t the company they’re pouring that spending into (NVIDIA) be rising?
Rotation or Reckoning?
Whether this moment is an opportunity or the beginning of a reckoning depends on your opinion of AI. My personal belief: AI acceleration has been incredible the past few months. Microsoft is being punished as much for not spending last year as it is for spending today. That is to say, the company pulled back on investments early in 2025 and now doesn’t have enough AI capacity for its internal services like Copilot.
From that perspective, it makes sense for hyperscalers to accelerate. With a company like Amazon now trading at half the forward PE of Walmart, my bet is there’s incredible opportunity in the Magnificent 7 after a shaky start to 2026.
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