Why Billionaires Are Rebalancing Tech Portfolios: A Strategic Shift from the Magnificent Seven to High-Potential Alternatives

The tech landscape in 2025 is undergoing a seismic shift as billionaire investors recalibrate their portfolios, moving away from the dominance of the "Magnificent Seven" (Mag 7) toward AI-driven alternatives. This reallocation is driven by two critical factors: valuation discipline and the explosive growth potential of AI infrastructure. While the Mag 7-Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla-have historically defined market performance, their outsized influence now raises concerns about overconcentration and sustainability. Meanwhile, companies like Broadcom, Taiwan Semiconductor Manufacturing (TSM), and Nvidia are emerging as compelling alternatives, offering robust AI-driven growth and more attractive valuation metrics.

Valuation Discipline: The Mag 7's Eroding Edge

The Mag 7 accounted for nearly 35% of the S&P 500's valuation in 2025, but their dominance is being questioned. According to a report by Kingsview Capital, growing skepticism about the sustainability of their valuations has prompted investors like Ed Yardeni of Yardeni Research to advocate for a broader diversification into sectors like healthcare, financials, and industrials. While the Mag 7's earnings growth (projected at +21.0% in 2025) outpaces the rest of the S&P 500, their valuation multiples are increasingly scrutinized. For instance, Apple's EV/EBITDA stands at 54.79, and Amazon's at 8.62, reflecting divergent investor sentiment. Microsoft's P/E of 34.9 (slightly above its 10-year median of 32.1) appears reasonably valued given its AI-driven cloud growth. However, Tesla's underperformance-up only 10% in 2024-highlights the risks of overreliance on a single stock.

The Mag 7's collective EV/EBITDA averaged 28.5x in 2024, but this masks extremes: Nvidia's ratio soared to 58.62x, while Apple and Amazon traded at 19.9x and 20.6x, respectively. Morgan Stanley analysts note that these valuations, while 30% below their five-year peak, remain 50-60% above trough levels. This volatility underscores the need for valuation discipline, particularly as competition intensifies and growth rates normalize.

AI-Driven Growth: The Rise of the New Magnificent Seven

Billionaires like Chase Coleman have redefined the "Magnificent Seven," excluding Apple and Tesla to focus on AI infrastructure leaders such as Broadcom, TSM, and Nvidia. This shift reflects a strategic pivot toward companies directly positioned in the AI value chain. For example, Broadcom's AI revenue surged 74% year-over-year to $6.5 billion in Q4 2025, driven by demand for ASICs in generative AI training. Its AI infrastructure backlog exceeds $73 billion, with shipments expected over 18 months. Similarly, TSM's P/E ratio of 24.9x in 2024 and an EV/EBITDA of 15.1x position it as a compelling alternative, given its leadership in manufacturing chips for AI workloads.

Nvidia, the poster child of AI hardware, exemplifies the sector's potential. Its data center revenue hit $51.2 billion in Q3 2025, up 66% year-over-year, supported by a forward P/E of 24.04 and EV/EBITDA of 32x. These metrics suggest undervaluation relative to peers like Broadcom (TTM EV/EBITDA of 51x), despite Nvidia's dominant role in AI chip development. The broader AI ecosystem is also thriving: Big Tech's capital expenditures are forecast to exceed $405 billion in 2025, fueling demand for infrastructure suppliers.

Strategic Implications for Investors

The rebalancing of portfolios from the Mag 7 to AI-driven alternatives reflects a nuanced understanding of valuation and growth dynamics. While the Mag 7's earnings dominance is undeniable, their high multiples and concentration risks make them less attractive for long-term, disciplined investors. Conversely, companies like Broadcom and TSM offer a blend of robust revenue growth and more attractive valuations. For instance, Broadcom's strategic investments in silicon photonics and partnerships with OpenAI position it as a key player in the next phase of AI adoption.

Moreover, the shift aligns with broader macroeconomic trends. As AI development accelerates, the debate over which companies are best positioned for the next tech boom becomes critical. The Mag 7's influence may wane if their growth rates normalize, while AI infrastructure providers could see sustained demand. This reallocation is not a rejection of the Mag 7 but a recalibration to balance risk and reward in an evolving market.

Conclusion

Billionaire investors are demonstrating valuation discipline by diversifying away from the Mag 7's overconcentration and toward AI-driven alternatives. This strategy leverages the explosive growth of AI infrastructure while mitigating risks associated with high multiples and market saturation. As the tech sector evolves, the new "Magnificent Seven"-led by companies like Broadcom, TSM, and Nvidia-offer a compelling case for investors seeking both innovation and prudent risk management.