The stock market is taking a breather after a 20% run higher this year. According to Fidelity, that was mostly driven by tech stocks, which are up 25% year-to-date.

Dig a little deep, though, and we see the S&P 500 is once again mostly driven up by the same forces that allowed the index to gain 24% last year: the Magnificent Seven stocks.

Six of the seven companies are tech stocks, and the definition could be stretched enough to include Tesla (NASDAQ:TSLA). They were responsible for almost all of the index’s performance in 2023.

That is because the benchmark index is a market cap-weighted barometer. As the Magnificent Seven are among the largest stocks in the market, with most having trillion-dollar-plus valuations and representing over a third of the index’s value, their stock price movements put a finger on the S&P 500’s scale.

Most Magnificent Seven stocks are repeating their performance this year, though to a lesser degree. That suggests this small coterie of tech stocks is moving the market again. Earlier this year, they accounted for 80% of the index’s jump higher. The following three members have the best results so far this year.

Alphabet (GOOG, GOOGL)

Google’s parent company, Alphabet (NASDAQ:GOOG, GOOGL), is down 11% from its peak, though the stock remains up 23% from the start of the year. Although shares are moving up again, they tumbled 5% after reporting second-quarter earnings last week. 

Revenue and profit beat analyst expectations, but as Alphabet pours more money into generative AI initiatives, especially into its Google Cloud business, capital spending is running higher than anticipated. Capital expenditures soared 91% year-over-year to $13 billion, and it expects capex to run at about that rate each quarter throughout the rest of the year.

The concern is there is no timeline for when the tech stock will see a return from its investments. Alphabet was late to the artificial intelligence game but has been making up for lost time. It has integrated AI throughout its products and services, particularly search and cloud services. Analysts see the hyperscaler market going from underinvested last year to equilibrium this year. And then, if spending continues at its current torrid pace, it will be overbuilt next year.

Not all are worried; the bounceback in digital ad spending softens whatever blow might come. Google’s advertising revenue jumped 11% from last year to $64.6 billion, which lays a solid foundation for future growth.

Meta Platforms (META)

The market viewed Meta Platforms (NASDAQ:META) spending on AI differently. Investors loved it and sent Meta shares soaring. While the social media platform wasn’t exactly cutting back spending on the metaverse, much of Meta’s focus is on artificial intelligence.

Investors dumped Meta stock earlier this year when CEO Mark Zuckerberg said Meta would ramp up AI spending. They remembered how Meta simply dumped money into a metaverse dumpster fire. Its Reality Labs division lost $4.5 billion this quarter and has sucked out $8.3 billion in operating profits for the first six months of 2024. Investors worried it would repeat that performance with AI.

It hasn’t turned out that way. Zuckerberg says Meta Platforms is building the most advanced large language models. He says, “Meta AI is on track to be the most used AI assistant in the world by the end of the year.” While it hasn’t figured out a way to make money on AI just yet, Meta believes it will fire up profits on Facebook, Instagram and elsewhere.

Revenue shot 22% higher in the second quarter to $39 billion, easily beating estimates of $38.3 billion as advertising revenue remained strong. Capital spending for the year will range from $37 billion to $40 billion.

Meta Platforms stock is up 40% in 2024 and should continue climbing higher.

Nvidia (NVDA)

Not surprisingly, Nvidia (NASDAQ:NVDA) remains the primary market mover. Its stock is up 120% this year, even after giving up more than a fifth of its gains since June’s high point. The stock appeared set for a reversal after Alphabet, Meta, Microsoft (NASDAQ:MSFT) and even Advanced Micro Devices (NASDAQ:AMD) reported heightened data center demand. 

Of course, Nvidia is the premier provider of AI chips for data centers. Its first-quarter results, released in May, showed record sales. As tech stocks continue to invest in AI and data center needs, Nvidia’s future growth prospects look bright.

The Justice Department, however, is throwing a wet towel on the party. The Information reports that the agency investigated whether Nvidia pressured cloud service providers to buy multiple products and whether it charged customers more for networking equipment if they bought AI chips from rivals like AMD.

The investigation may not go anywhere. However, investors may worry whether all the money spent on AI investments can be justified. Nvidia stock may remain under pressure for the foreseeable future.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.