The Roundhill Magnificent Seven ETF (BATS:MAGS), a fund serving as a “Magnificent Seven” proxy, fell around 1.5% on Wednesday, reflecting the choppy start to 2026 for the once-unshakeable cohort of mega-cap tech stocks that powered markets for much of the past three years.

The slump reflects growing discomfort from investors around the so-called Magnificent Seven, which have moved on from being the market's leading engine to something closer to dead weight. This year-to-date, five of the seven constituents are in the red, with Nvidia Corp (NASDAQ:NVDA), Apple, Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT), Meta Platforms, Inc (NASDAQ:META), and Tesla Inc (NASDAQ:TSLA) all lower. Only Alphabet Inc (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN) have managed to stay afloat.

A Market Engine Losing Its Momentum

Although MAGS managed to gather $91.25 million in inflows year-to-date, per data aggregated by Etfdb, which is a 43% increase from the same period last year, the weakness in the constituents has dragged MAGS down about 2.3% so far in 2026, slightly underperforming the group's average decline (measured by the CNBC Magnificent 7 Index) of roughly 1.6%.

The timing is important. For much of the past three months, the Magnificent Seven comfortably outpaced the equal weighted market, but that relationship snapped as the calendar flipped to January.           

The broader market is feeling the pain. The S&P 500 is up only about 0.7% this year, showing us how dependent index-level performance remains on a handful of mega-cap names that still account for more than 35% of the benchmark's total weighting. Strip out that concentration, and the picture looks very different. The Invesco S&P 500 Equal Weight ETF (NYSE:RSP) is up 3.4% year-to-date.

A Rotation Testing Tech's Dominance

Part of the pressure on MAGS comes from a clear rotation out of growth-heavy tech and into value (thanks to the Fed's hesitation to cut rates as much as markets desire). Since mid-October, the Vanguard Value ETF (NYSE:VTV) has gained about 7%, outperforming the Vanguard Growth ETF (NYSE:VUG), as investors hunt for overlooked corners of the market.

Still, not everyone is calling time on mega-cap tech. With fourth-quarter earnings approaching, some strategists see the pullback as a pause rather than a breakdown. For instance, Jeff Buchbinder, chief equity strategist at LPL Financial, said that the recent weakness among the Magnificent Seven looks like a breather rather than a total breakdown mainly because AI-related names (many of them in the Mag7) are still expected to drive the majority of S&P 500 earnings growth for the upcoming quarter.

AI-linked companies, including the Mag7 are expected to drive the bulk of S&P 500 earnings growth, with technology sector profits forecast to jump more than 25%.

For now, though, MAGS is offering a reminder investors haven't heard in a while, that even market darlings need to catch their breath.

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