The latest earnings from Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ:META), Amazon.com Inc (NASDAQ:AMZN), and Alphabet, Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) didn't just move stocks, they challenged the once-unified "Magnificent Seven" trade. For ETF investors, that split is becoming an opportunity.
• Direxion Daily MSFT Bear 1X ETF stock is among today’s top performers. Why is MSFD stock surging?
Ryan Lee, senior vice president at Direxion, summed it up best: the market is no longer rewarding AI ambition alone; it's demanding proof that massive spending can turn into revenue, fast.
One Theme, Four Different Outcomes
All four companies leaned heavily into AI. All four spent aggressively. That's where the similarities end.
Microsoft reassured markets that earlier concerns around AI capacity were overblown.
"Today's earnings were a test to see if this AI capacity hurdle was short-lived or a structural issue, and signs point to the former," Lee said, after the company delivered a strong cloud performance and triple-digit AI infrastructure growth.
Alphabet also landed on the "rewarded" side of the trade. Its capex push is being embraced because it's backed by what Lee called a "$460 billion order backlog," alongside 22% revenue growth. In this case, spending is being interpreted as strength, not excess.
Amazon? Same spending story, different reaction. "When a megacap name beats on most metrics but sells off… there is only one culprit in recent quarters: capex," Lee noted, as investors punished declining free cash flow tied to AI investments.
Meta may be the most complex case. While still "the cleanest example of AI monetization," according to Lee, it's also hitting real-world limits. "The AI buildout has hit its first major physical wall," he said, pointing to server shortages and rising infrastructure costs.
ETFs Are No Longer Just Broad Bets
That divergence is showing up quickly in ETFs. Thursday mid-morning, Meta, Microsoft and Amazon were trading 10%, 4.5%, and 1.2% in the red, while Alphabet climbed 6%.
Instead of treating Big Tech as a single trade, investors can use targeted tools to express short-term views. Leveraged single-stock ETFs — such as Direxion Daily MSFT Bear 1X ETF (NASDAQ:MSFD), Direxion Daily AMZN Bear 1X ETF (NASDAQ:AMZD), and Direxion Daily META Bear 1X ETF (NASDAQ:METD) — are turning earnings volatility into tactical trades rather than long-term bets.
At the index level, products such as Direxion Daily Magnificent 7 Bear 1X ETF (NYSE:QQQD) are capturing the growing dispersion within the Magnificent Seven itself, something that barely existed a year ago when the group moved in near lockstep.
The Real Trade: Second-Order Effects
The bigger shift may be happening one layer deeper.
AI capex isn't impacting Big Tech only. It is cascading into the supply chain. Lee pointed out that spending decisions from companies such as Meta and Alphabet have "immediate implications" for players such as NVIDIA Corp (NASDAQ:NVDA), Broadcom Inc (NASDAQ:AVGO) and Advanced Micro Devices Inc (NASDAQ:AMD).
That's why semiconductor ETFs like Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL), along with tech sector funds Direxion Daily Technology Bear 3X Shares (NYSE:TECS), are becoming key vehicles on Thursday for positioning around earnings.
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