Why Meta and Amazon Remain High-Conviction Buys in the Magnificent Seven

The Magnificent Seven-Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla-have long dominated global markets, but their influence has intensified in 2025. While recent volatility and macroeconomic headwinds have tested investor patience, Meta (META) and Amazon (AMZN) stand out as compelling long-term plays, driven by transformative AI strategies and structural growth tailwinds. Despite concerns about S&P 505 concentration risks, their ability to scale infrastructure, monetize innovation, and capture emerging markets justifies a high-conviction stance.

Meta: AI as the Engine of User Growth and Revenue

Meta's third-quarter 2025 results underscore its strategic pivot toward AI-driven engagement and monetization. The company reported a 26% year-over-year revenue increase, reaching $51.24 billion, fueled by AI-powered ad ranking systems that boosted ad revenue and user interaction. This growth was amplified by the launch of the Vibes feature in the Meta AI app, which saw downloads surge by 56% month-to-month to 3.9 million as of October 2025 according to CNBC analysis.

Meta's user base also expanded, with 3.54 billion daily active people (DAP) in September 2025, an 8% year-over-year increase. The company's aggressive capital expenditures-planned to rise sharply in 2026-signal a commitment to building AI infrastructure that supports "personal superintelligence" for users as stated in the earnings call. While a one-time tax charge of $15.93 billion skewed net income figures, excluding this charge, Meta's effective tax rate would have been 14%, and net income $18.64 billion. This resilience highlights the durability of its AI-driven business model, even amid regulatory and macroeconomic pressures.

Amazon: Cloud and Advertising as Dual Growth Engines

Amazon's Q3 2025 results reinforce its dominance in two critical sectors: cloud computing and digital advertising. AWS revenue grew 20.2% year-over-year to $33 billion, driven by AI infrastructure demand. The company's $11 billion Project Rainier data center, dedicated to running Anthropic's AI models, further cements its leadership in the AI arms race.

Simultaneously, Amazon's advertising revenue surged 24% year-over-year to $17.7 billion, reflecting its expanding reach. Tools like agentic AI are streamlining ad creation and performance, while its demand-side platform (DSP) now extends to Netflix, Spotify, and SiriusXM. Despite a flat operating income of $17.4 billion due to legal settlements and severance costs, Amazon's total net sales hit $180.2 billion, a 13% year-over-year increase. This underscores the company's ability to scale revenue streams even as it navigates operational challenges.

Addressing Underperformance and Concentration Risks

Critics argue that the Magnificent Seven's collective 32.2% market share in the S&P 500 creates systemic risks according to market analysis. In Q3 2025, these seven companies accounted for 41.8% of the index's 14.8% total return, though individual performance varied. For example, Amazon contributed only 3.9% to the S&P 500's price gain, lagging behind peers like Nvidia. However, this underperformance in price does not fully capture Amazon's 10.6% contribution to the index's earnings growth, highlighting its structural importance.

Meta, meanwhile, faces scrutiny over its 40% operating margin amid rising costs, but its AI investments are already translating into user and revenue growth. Both companies exemplify the trade-off between short-term volatility and long-term innovation-a dynamic that defines the Magnificent Seven's role in the market.

Conclusion: The Case for Long-Term Conviction

While the S&P 500's concentration in the Magnificent Seven raises valid concerns, Meta and Amazon's ability to leverage AI, scale infrastructure, and diversify revenue streams positions them as cornerstones of the next decade's growth. Meta's focus on personal AI and Amazon's dual dominance in cloud and advertising create moats that are difficult to replicate. For investors willing to look beyond quarterly noise, these companies represent not just high-conviction buys, but essential holdings in a rapidly evolving tech-driven economy.