You cannot follow an economic or investment story these days without hearing about artificial intelligence.

There now seems to be wide acceptance of the idea that AI is becoming a true general-purpose technology, similar in impact to electricity or the internet, with the potential to lift productivity and long-term economic growth.

Questions now seem to be around whether the massive capital spending to support AI will pay off, stretched stock valuations, which companies will be winners and losers, and of course its impact on human beings.

But it appears that almost everyone believes impacts will be big.

Until very recently, tech company announcements about huge AI-related capital spending were rewarded with rising stock prices.

But Amazon’s (AMZN) recent announcement about a 50% boost to capital spending to $200 billion in 2026 was met by about a 10% stock decline.

Now, to put this is perspective, AMZN stock has grown more than 750% from February 2016 to February 2026, representing an annualized return of about 23%.

But this recent price action appears to show that investors are asking about future payoffs from huge capital spending.

Microsoft (MSFT), Alphabet (GOOG) and Meta (META) together are projected to spend about $450 billion in 2026.

All Magnificent 7 stocks have seen some downdrafts as investors ask questions about future payoffs and winners/losers, but the past decade has produced remarkable returns for investors even with some recent pullback.

For the decade ending Feb. 4, MSFT stock has jumped just under 700%, GOOG is up more than 800% and META is up just under 500%.

The biggest gainer in the Magnificent 7 has been chip maker Nvidia (NVDA), up more than 24,000%, with Tesla (TSLA) up “merely” 3,400%. Folks, these are incredible numbers.

Keep in mind that these stocks are by no means “cheap” by traditional valuation methods.  On average, the Mag 7 stocks are selling at more than 30 times forward earnings, about 50% higher than the S&P 500 average at 20 times.  

Higher valuations are being justified by the belief that AI will be a huge potential driver of productivity gains as it becomes increasingly adopted.

For example, JPMorganChase has said the bank is embedding AI across trading, research, fraud detection, marketing, customer service and operational processes, with thousands of employees working on AI use cases.

CEO Jamie Dimon has said “AI will be in every one of the company’s processes,” acting as a co-pilot for employees and improving efficiency and decision quality.

JPMorganChase said it is investing billions of dollars in technology, including AI, and expects essentially all 300,000-plus employees to use AI tools.

Similarly, Vanguard is already applying AI and machine learning to client service personalization, operations efficiency, risk management and some active equity quantitative models.

Other stories abound across business and government organizations.

Along with the potential payoffs come risks. Dimon highlights both the upside and disruption.

“AI can raise productivity, shorten work weeks and help in areas like medical research, but will also change or eliminate some job functions, requiring retraining and redeployment rather than simply accepting mass displacement,” he said.

Dimon notes that even if aggregate AI economics work out, there will likely be “spectacular winners and equally notable losers, given the capital intensity and winner-takes-most dynamics in part of the ecosystem.”

I am finding more and more similar views about big winners and losers, but the question is which ones will be the winners? And will they even be from the Mag 7, or will there be dark horses in the race?

This uncertainty argues for the wisdom of diversification, certainly across the big players, and perhaps even more broadly to include companies that will use AI to improve productivity and profits.

It’s worth noting that as of February, the Mag 7 stocks account for about one-third of the market capitalization of the S&P 500, so even this broad-based holding gives you significant exposure to the big leaders in the AI race while including bets on businesses like JPMorganChase and so many others that may be beneficiaries of the massive tech spending.

As always, stay tuned to watch this amazing story.