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AI Stock Sell-Off: Are Mag 7 Stocks Still Buys? ETFs in Focus
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Key Takeaways
AI financing fears hit CoreWeave and Nebius, but chip demand remains strong.
Mag-7 stocks offer mixed FY27 earnings growth prospects and valuations.
NVIDIA looks attractive, while Tesla's lofty valuation raises concerns.
Technology stocks came under pressure last week as concerns about AI financing and spending weighed on investor sentiment. The sell-off hit major AI infrastructure players and pushed both the S&P 500 and Nasdaq Composite into negative territory for the week.
AI infrastructure providers CoreWeaveCRWV and NebiusNBIS each ended the week down more than 25%. Both companies, along with Oracle (ORCL - Free Report) , are facing questions about their ability to generate free cash flow (read: AI Debt Boom: ETF Areas to Play).
Baird technology strategist Ted Mortonson told Yahoo Finance that these companies are likely among the weakest in the tech sector in terms of free cash flow. He also highlighted the rising cost of capital amid inflation worries and growing scrutiny of the financial arrangements supporting the AI boom.
Their commentary suggests that demand for AI chips and related infrastructure remains robust, even as investors grow more cautious about how companies finance their expansion and convert spending into profits.
Ulrike Hoffmann-Burchardi, UBS's chief investment officer of the Americas and global head of equities, advised investors to focus on companies where AI spending is translating into sustainable earnings growth and wider adoption across businesses and consumers, as quoted on the same Yahoo Finance article.
Investors will now be watching to see whether massive AI investments can generate durable profits and justify the valuations attached to AI-related stocks.
Let’s dig into the prospects of some well-known AI plays.
Meta
Image Source: Zacks Investment Research
The above table shows that Meta's (META - Free Report) earnings growth outlook is moderate for FY27, although its recent earnings growth has been lackluster. Its valuation appears fair, with a forward P/E of 22.41X.
Amazon
Image Source: Zacks Investment Research
Amazon (AMZN - Free Report) 's earnings growth outlook looks mixed, while its valuation appears cheap, with a forward P/E of 19.21X.
Alphabet
Image Source: Zacks Investment Research
Alphabet (GOOGL - Free Report) 's earnings growth outlook for FY27 looks downbeat, although its valuation appears cheap, with a forward P/E of 16.58X.
Apple
Image Source: Zacks Investment Research
Apple (AAPL - Free Report) looks to be a decent play from an earnings-growth perspective. Its shares trade at a forward P/E of 41.03X, making the stock neither particularly cheap nor excessively expensive. Apple-heavy ETFs include the likes of Global X PureCap MSCI Information Technology ETFGXPT (read: Apple Takes Aim at the Smart Home: ETFs to Tap?).
NVIDIA
Image Source: Zacks Investment Research
NVIDIA (NVDA - Free Report) is well positioned to benefit from massive AI investments by hyperscalers, which have been driving its major share of revenue growth.The theory is supported by NVIDIA's financial results: in its fiscal Q2 2027, data center revenue reached $89 billion, up 117% year over year.
The Zacks Rank #1 (Strong Buy) stock trades at a forward P/E of only 23.03X, suggesting an attractive valuation. NVDA is up a modest 13.4% this year (as of Oct. 16, 2026). Investors can gain exposure to NVDA through the VanEck Semiconductor ETF(SMH - Free Report) .
Tesla
Image Source: Zacks Investment Research
Tesla (TSLA - Free Report) appears to be a decent FY27 play from an earnings-growth perspective, but its valuation is a concern. TSLA shares trade at a lofty forward P/E of 209.73X. This high valuation could face pressure if earnings growth fails to justify the premium. TSLA is down 19% this year (as of Oct. 16, 2026).
Microsoft
Image Source: Zacks Investment Research
Microsoft (MSFT - Free Report) shares trade at a forward P/E of 26.92X, while MSFT’s earnings-growth outlook looks relatively strong compared with other hyperscalers. Technology Select Sector SPDR Fund (XLK - Free Report) can be tapped to play MSFT in the basket form.
View the Zacks #1 Rank List
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AI Stock Sell-Off: Are Mag 7 Stocks Still Buys? ETFs in Focus
Key Takeaways
Technology stocks came under pressure last week as concerns about AI financing and spending weighed on investor sentiment. The sell-off hit major AI infrastructure players and pushed both the S&P 500 and Nasdaq Composite into negative territory for the week.
AI infrastructure providers CoreWeave CRWV and Nebius NBIS each ended the week down more than 25%. Both companies, along with Oracle (ORCL - Free Report) , are facing questions about their ability to generate free cash flow (read: AI Debt Boom: ETF Areas to Play).
Baird technology strategist Ted Mortonson told Yahoo Finance that these companies are likely among the weakest in the tech sector in terms of free cash flow. He also highlighted the rising cost of capital amid inflation worries and growing scrutiny of the financial arrangements supporting the AI boom.
Chip Industry Signals Point to Strong AI Demand
While AI infrastructure stocks struggled, comments from semiconductor equipment maker ASML (ASML - Free Report) and contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) offered a more encouraging picture of underlying demand (read: TSMC's Record Q3 Earnings & Upbeat Outlook Put These ETFs in Focus).
Their commentary suggests that demand for AI chips and related infrastructure remains robust, even as investors grow more cautious about how companies finance their expansion and convert spending into profits.
UBS strategists similarly viewed the latest volatility as a recalibration of expectations rather than a fundamental break in the AI investment story, as quoted on Yahoo Finance (read: Buy the Dip in Semiconductor Stocks & ETFs?).
Earnings Growth Matters
Ulrike Hoffmann-Burchardi, UBS's chief investment officer of the Americas and global head of equities, advised investors to focus on companies where AI spending is translating into sustainable earnings growth and wider adoption across businesses and consumers, as quoted on the same Yahoo Finance article.
Investors will now be watching to see whether massive AI investments can generate durable profits and justify the valuations attached to AI-related stocks.
Let’s dig into the prospects of some well-known AI plays.
Meta
Image Source: Zacks Investment Research
The above table shows that Meta's (META - Free Report) earnings growth outlook is moderate for FY27, although its recent earnings growth has been lackluster. Its valuation appears fair, with a forward P/E of 22.41X.
Amazon
Image Source: Zacks Investment Research
Amazon (AMZN - Free Report) 's earnings growth outlook looks mixed, while its valuation appears cheap, with a forward P/E of 19.21X.
Alphabet
Image Source: Zacks Investment Research
Alphabet (GOOGL - Free Report) 's earnings growth outlook for FY27 looks downbeat, although its valuation appears cheap, with a forward P/E of 16.58X.
Apple
Image Source: Zacks Investment Research
Apple (AAPL - Free Report) looks to be a decent play from an earnings-growth perspective. Its shares trade at a forward P/E of 41.03X, making the stock neither particularly cheap nor excessively expensive. Apple-heavy ETFs include the likes of Global X PureCap MSCI Information Technology ETF GXPT (read: Apple Takes Aim at the Smart Home: ETFs to Tap?).
NVIDIA
Image Source: Zacks Investment Research
NVIDIA (NVDA - Free Report) is well positioned to benefit from massive AI investments by hyperscalers, which have been driving its major share of revenue growth.The theory is supported by NVIDIA's financial results: in its fiscal Q2 2027, data center revenue reached $89 billion, up 117% year over year.
The Zacks Rank #1 (Strong Buy) stock trades at a forward P/E of only 23.03X, suggesting an attractive valuation. NVDA is up a modest 13.4% this year (as of Oct. 16, 2026). Investors can gain exposure to NVDA through the VanEck Semiconductor ETF(SMH - Free Report) .
Tesla
Image Source: Zacks Investment Research
Tesla (TSLA - Free Report) appears to be a decent FY27 play from an earnings-growth perspective, but its valuation is a concern. TSLA shares trade at a lofty forward P/E of 209.73X. This high valuation could face pressure if earnings growth fails to justify the premium. TSLA is down 19% this year (as of Oct. 16, 2026).
Microsoft
Image Source: Zacks Investment Research
Microsoft (MSFT - Free Report) shares trade at a forward P/E of 26.92X, while MSFT’s earnings-growth outlook looks relatively strong compared with other hyperscalers. Technology Select Sector SPDR Fund (XLK - Free Report) can be tapped to play MSFT in the basket form.