The Great Rotation Crushed These "Magnificent Seven" Stocks. Billionaire Investors Are Loading Up.
Key Points
Meta Platforms' shares are down, but the company is seeing strong, accelerating revenue growth.
Microsoft's shares have been crushed to start the year, despite its huge cloud computing backlog.
Amazon's stock has struggled despite its e-commerce business showing strong operating leverage and accelerating cloud revenue growth.
Investors worried about the economy and the broader markets have been rotating out of tech stocks, including the "Magnificent Seven," and into value and small-cap stocks. And yet, some of these top growth stocks were being scooped up by billionaire investors at higher prices at the end of last year. Do they know something that the market doesn't? And should you maybe consider buying them as well, as they are trading at even more discounted prices than when the billionaires bought in?
Here are three Magnificent Seven stocks trading at discounted prices that you might want to take a closer look at as potential long-term investments.
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Meta Platforms: Using AI to drive growth
Meta Platforms (NASDAQ: META) was a popular stock among billionaires in Q4, with the likes of Bill Ackman of Pershing Square Capital and David Tepper of Appaloosa Management initiating large positions. However, the stock fell around 13% in Q1, as some investors questioned the company's large capital expenditure (capex) plans.
That said, few companies have demonstrated that they can apply artificial intelligence (AI) to their core businesses to drive growth better than Meta. The social media giant is using AI to improve its recommendation algorithm, keeping users on its site longer, and allowing it to serve them more ads. At the same time, it's providing AI-powered tools to help its small- and medium-sized advertising partners better create ads, target users, and automate bidding to improve conversions. This is leading to more ad impressions and higher ad prices, fueling Meta's revenue growth.
Smartly, the company is pulling back on its unsuccessful metaverse, while introducing ads to its popular messaging platform. WhatsApp and new social media site Threads should be a long-term growth driver.
Microsoft: A huge cloud computing backlog
Microsoft (NASDAQ: MSFT) got punished in Q1, with the stock plunging more than 23% to start the year. However, it too saw billionaire hedge fund managers buying its stock in Q4, including Ole Andreas Halvorsen of Viking Global, where it is his top position, and Philippe Laffont of Coatue Management, where the stock is his third-largest holding.
Microsoft's tough start to 2026 can be attributed to the software-as-a-service (SaaS) sell-off and caution over the amount of money cloud computing providers are pouring into AI infrastructure. However, the company's enterprise software business has been seeing solid growth led by the adoption of its AI assistant copilots, while its cloud computing unit, Azure, has been red hot, seeing a 39% surge in revenue last quarter.
While Microsoft is spending big on AI infrastructure, it has a huge backlog, with $625 billion in commercial remaining performance obligations (RPOs), largely backed by OpenAI. This gives it a strong, visible runway of growth. Meanwhile, it also has a more than 25% stake in the ChatGPT maker, as well as intellectual property rights to its AI model and products through 2032.
Amazon: Strong operating leverage and cloud growth
Amazon (NASDAQ: AMZN) is another Magnificent Seven member that saw its stock fall despite seeing billionaires buying at the end of last year. The stock dropped nearly 10% in Q1. Meanwhile, Ackman, Laffont, Halvorsen, and Point72's Steven Cohen were all loading up on shares in Q4.
The combination of aggressive AI infrastructure spending plans and worries over the state of the consumer has weighed on Amazon shares this year. However, Amazon is the largest cloud provider in the world, and the company is starting to see growth at Amazon Web Services (AWS). The company also looks more prepared to lean into and advance its custom AI chips, which can give it a cost advantage, and to be more aggressive in pursuing its own AI model and AI agents.
At the same time, Amazon's e-commerce business is seeing incredible operating leverage with profitability growth far exceeding sales growth, driven by robotics, automation, and AI. This is still a solidly growing business, with its North American revenue up 10% last quarter and its international revenue jumping 17%. Its high-margin sponsored ad business has also been a strong growth driver.
Follow the billionaires
Meta, Microsoft, and Amazon are all top-notch companies that have seen their shares fall to start the year. You can now buy all three at prices that are lower than what top billionaire investors were buying them at just several months ago. That would be a smart move in my book.
Geoffrey Seiler has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.