The performance of the Magnificent Seven US technology companies could be challenged by intensifying competition, according to one of London’s largest tech investors.
As more cash floods into artificial intelligence and large language models become more sophisticated, the dominance of the elite group, which includes Microsoft, Nvidia and Alphabet, the owner of Google, could be disrupted, Ben Rogoff of Polar Capital Technology Trust, which manages about £5.8 billion in assets, said.
“If there was ever going to be a risk posed to the natural monopoly statuses of these businesses, it would be when AI became more disruptive,” he said. “And I think that that’s what we’re looking at in the years ahead.”
The value of the largest US tech companies has been turbocharged by an expectation that they will be able to capitalise on a boom in demand for AI. The so-called hyperscalers — Alphabet, Meta, Microsoft, Amazon — are spending hundreds of billions of dollars a year in aggregate on building AI infrastructure, including data centres, electricity generators and the chips to power AI workloads.
“The cost of remaining in the AI race continues to move up meaningfully,” Rogoff said.
The performance of the Magnificent Seven could also diverge further, he said, as some companies gain a greater lead in AI and others fall behind. “It feels to us like the AI story is going to become more complicated,” he added.
“A lot of people in the market think the AI story is synonymous with Mag Seven and we don’t see it that way at all. We see the AI story as moving into a more disruptive phase where ever-more capable models disrupt companies at the periphery of tech and start to present more tangible risks to the value of incumbency also within tech.”
Polar Capital Technology Trust entered the FTSE 100 in February. Its largest position is in Nvidia, the chipmaker that accounts for 10 per cent of its net asset value, followed by 8.8 per cent in Alphabet. However, relative to its benchmark, the trust is underweight the Magnificent Seven.
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The trust also sold out of its investment in Oracle, the software company co-founded by Larry Ellison, one of the world’s richest men, preferring companies that are funding capital expenditure via equity rather than debt, he said.
Rogoff, who describes his approach as “AI maximalist”, dismissed growing concerns that an AI bubble is forming in public markets as valuations have risen sharply. He argues that as large language models have become larger and more sophisticated, spending on infrastructure to power AI will continue to rise.
The primary driver of the trust’s performance this year is that estimates for AI spending had been too pessimistic, he said. “And we’re hopeful that they’ll be too conservative as we look to 2026 and beyond.”
Waiting on the sidelines to capitalise on the companies capable of monetising AI as it becomes cheaper had not worked over the past three years, Rogoff said. “We assume that, at least at this point, that won’t necessarily happen in 2026 either,” he said.