AI Is Splitting the Magnificent Seven Into Winners and Laggards, Says Lo Toney

AI is splitting the Magnificent Seven into separate camps instead of lifting the group as one trade, Plexo Capital founding managing partner Lo Toney told CNBC’s “Squawk Box” this week.

CNBC’s Jim Cramer had urged investors days earlier to revisit the group, arguing years of AI spending are starting to pay off. “I think it’s time to buy,” Cramer said.

The Magnificent Seven’s AI Divide

Toney pushed back on treating the seven stocks as one trade again. He said two things now separate them, infrastructure control and the ability to profit from it.

Hyperscalers are cloud giants building massive AI data centers. Toney places Google, Microsoft, and Amazon in this group. They still must prove that spending pays off, a test also facing other Nasdaq stocks that already doubled this year.

Meta and Apple sit in a different category, Toney said. They do not need AI as a standalone business. Instead, they use it to strengthen advertising and hardware franchises they already own.

Tesla is a third case. It is turning AI into physical products and services, a path carrying its own regulatory and profitability questions, Toney said.

Nvidia (NVDA) sits apart too. Toney said the chipmaker profits while its customers prove out the economics themselves. That position now extends into software.

Nvidia agreed on September 3 to buy the open-source AI platform Hugging Face for about $12.9 billion. Its own upcoming earnings remain the clearest test of whether that spending is paying off broadly.

Google’s AI Advantage

Applying his framework, Toney named Alphabet’s Google (GOOGL) as his preferred pick. It owns its data centers and custom chips while monetizing AI through search, YouTube, cloud, and its self-driving unit, Waymo.

He pointed to Google shares up roughly 42% in the last 12 months against a Wall Street consensus target implying about 25% more upside, a wider gap than most peers Jim Cramer has recently favored.

Not every Magnificent Seven stock will move together as AI reshapes their economics. Some names still owe investors proof that spending converts to profit, while Toney argues others are already collecting.