sport football: Forget Tariffs: This Is the Biggest Threat to the Mag 7

Forget Tariffs: This Is the Biggest Threat to the Mag 7

How long before artificial intelligence (AI) escapes the lab?

I'm not talking about AI fleeing human control like the movie I, Robot. Instead, I mean AI technology escaping the grasp of Big Tech.

And when it does escape, the so-called "Magnificent 7" could see their AI profit dreams evaporate.

The Mag 7 are the seven biggest tech and AI companies in the world: Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla. They have a combined market cap of nearly $14 trillion.

If you have been following me over the last week, you know I've been warning you of a Lost Decade of Wealth.

This won't happen right away. In fact, it wouldn't surprise me to see one more last big push up in stock prices.

Remember, the market does everything it can to suck in as much money as possible before it switches from a secular (long-term) bull market to a secular bear market.

I'm OK giving up that last rush of gains if it means I get to avoid the 10-plus years of lost returns that always follows the death of a secular bull market.

Why the Mag 7 Could Lose Its Iron Grip on AI

Right now, AI lives inside a "walled garden." Each AI version is jealously guarded behind the virtual walls of their respective Big Tech kingdoms.

But here's what Big Tech is missing: AI will eventually want to be free.

If you're not familiar with the concept, a walled garden is a closed ecosystem controlled by a singular operator.

Think Apple's App Store, Meta's Facebook, or Microsoft's Teams.

In the case of the App Store, Apple controls everything that happens on the platform… From the hardware that can access the platform… To the software the platform runs on… And the services it provides to consumers.

While walled gardens provide users with seamless experiences and increased security, they come at a cost.

These virtual gardens can turn into virtual prisons by limiting consumer choice. They also wall off innovations from outside, making them quickly obsolete. And obsolescence, my friends, is the death of any technology.

The same way the early "walled" versions of the internet (the intranets of the 1990s) ultimately failed… I believe the walled-off versions of AI will also fail.

Remember America Online (AOL)? It was the most successful "walled garden" of the early internet era.

AOL built a rich, curated experience – email, chatrooms, news feeds – all without requiring you to ever touch the broader web. In the beginning, the walled garden strategy worked for AOL.

There simply wasn't much else online.

But as the World Wide Web exploded in the late '90s with new content and services – powered by a tidal wave of investment aimed at attracting "eyeballs" – AOL's walled garden started looking more like a prison.

Billions of dollars poured into open internet innovation, driving tech valuations from just $1 billion in 1995 to $6.6 trillion by 2000.

For a while, AOL surfed that wave.

At its peak, the company was signing up 432,000 users per month, culminating with its $182 billion megamerger with Time Warner in January 2000.

Investing $100 in AOL's initial public offering (IPO) in 1992 would've turned into more than $28,000 by the end of 1999.

But by June 2015, Verizon had acquired AOL for $4.4 billion – a fraction of its peak value and a stunning fall from grace.

Why did AOL fail?

Because what investors back then thought the internet would become isn't exactly what the internet evolved to be today.

In the late '90s, AOL looked like the future. Then came Google, Amazon, Facebook, Netflix, Apple – and everything changed.

Fast forward to today: The same trap is setting up around the Mag 7 stocks.

They're spending a combined $320 billion annually, racing to define and build what they believe will be the "best" AI.

And yes – just like AOL – there's money to be made in the near term. But long term? A closed system will not win. At some point, AI will "break free from the lab" and live out in the wild.

Or some startup, philanthropist, or group of hackers will fund and release an open-source AI that will grow and thrive without limits – making the walled gardens of Big Tech obsolete.

And when that happens, the market will be forced to reprice what AI development is actually worth.

Pipe Dream Profits?

Buying the Mag 7 today means placing a very specific bet that:

Their AI models will stay dominant.
And closed systems will beat open innovation.

You're also betting they will earn enough future profits to justify paying a forward price-to-earnings (P/E) ratio of 28x earnings and 7.2x sales… Compared to 20x P/E and 2.7x sales for the S&P 500.

I'm not calling for the end of the Mag 7. But I am urging you to take a cold, hard look at their valuations – and ask yourself these questions:

How certain am I that the AI profits Big Tech is promising will actually materialize?
What if the "best" AI becomes free, open, and unstoppable – like the internet itself did?

If that happens, the ad businesses of Big Tech will survive.

But the monster profit growth needed to justify these valuations? That's the part I'm concerned about.

I believe the real next wave of outperformance in AI will happen outside Big Tech – in the decentralized, permissionless world of blockchain.

Today, there's been $468 billion invested in private AI startups.

The 58 largest AI stocks are valued at $14.1 trillion today. By comparison, the entire value of all AI blockchain tokens is just $2.5 billion – a tiny fraction.

Now, to be clear: A lot of blockchain AI projects are garbage and should be avoided. But there are a handful of serious projects positioned to become the infrastructure layer for decentralized AI.

And that's where I believe the next generation of life-changing profits will be found. I've been digging deep into this space and uncovered six decentralized AI names I believe could dominate as AI breaks free from Big Tech's control.

If you want my latest thinking, I recommend you check out my special research briefing on distributed AI technology. You can access it here.

Friends, the world is changing fast. Assuming today's Big Tech vision of AI is the final version would be repeating the exact same mistake AOL investors made in the late 1990s.

Don't make that mistake. Get ahead of it – and see where the real innovation is heading.

You can review my latest research briefing for free here.

Let the Game Come to You!

Big T