The biggest driver of the market rally since early last year has been the proliferation of artificial intelligence (AI). Many of the world's largest companies have been investing heavily to stake their claim in the resulting windfall. However, lurking just behind the scenes are concerns about the state of the broader economy and what it might mean for the short-term direction of the stock market.

With that as a backdrop, Meta Platforms (NASDAQ: META) was off 2.8%, Amazon (NASDAQ: AMZN) fell 3.3%, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) tumbled 3.6%, and Tesla (NASDAQ: TSLA) slumped 6.8% as of 3:10 p.m. ET.

To be clear, there was nothing in the way of company-specific news driving these so-called "Magnificent Seven" stocks lower today. This supports the conclusion that investors are reacting to a report that suggested the broader economy was slowing faster than expected.

It's all about the economy

The monthly jobs report, courtesy of the U.S. Bureau of Labor Statistics, showed that total nonfarm payrolls increased by 142,000 during the month of August, up from 89,000 in July, but well below economists' forecasts of 161,000. The unemployment rate came in as expected at 4.2%.

At first glance, this would appear to be good news. A weakening jobs picture suggests the economy is slowing, which makes it more likely that the Federal Reserve will begin to cut interest rates next month. Thus far, the Fed has been reluctant to reduce rates until it was certain that it was winning its battle against a red-hot economy that was accompanied by relentless inflation.

The headline numbers show growth is slowing, which gives the Fed cover to begin its long-awaited rate cuts. However, the devil is in the details, and other revelations in the report gave investors pause.

One of the more troubling factors was the speed at which the labor market has been weakening. The government released revised figures for the months of June and July, showing 86,000 fewer jobs were created over those two months than originally believed.

The Fed has been trying to slow rampant inflation without tipping the economy into a recession, thereby engineering a so-called "soft landing." The evidence thus far has suggested the Fed was on track to achieve this lofty goal, but the downward job revisions show the economy is cooling faster than originally believed. That increases the likelihood -- however remote –- that a recession could still occur.

As recently as July, the major market indexes were regularly tapping new all-time highs, but some investors see the worsening jobs picture as a warning bell and are taking profits as a cautionary measure.

The AI opportunity

So, what does this have to do with Meta, Amazon, Alphabet, and Tesla? The common thread that weaves the Magnificent Seven collective together is their potential to exploit AI. Each of these companies has been spending heavily to establish a beachhead in the AI revolution -- and it's easy to understand why.

Estimates vary wildly, but one of the more conservative takes suggests the market for generative AI could be worth between $2.6 trillion and $4.4 trillion annually, according to global management consulting firm McKinsey & Company.

This will represent a veritable windfall for businesses at the cutting edge of this technology. However, many smaller companies have been reluctant to invest in new and emerging technology until the economy is stabilized, and today's mixed data did little to provide those assurances.

Yet the future looks bright for our Magnificent Seven companies:

• Amazon and Alphabet are two of the "Big Three" cloud infrastructure providers and, as such, are well positioned to provide AI services to their cloud customers, reaping the financial rewards.

• Meta Platforms collected reams of data from the billions of users on its social media platforms to develop its Large Language Model Meta AI (LLaMA), which the major cloud providers pay to offer on their platforms.

• Tesla has been working for years to perfect its Full Self Driving (FSD) technology, which is fueled by AI. The company recently announced that it will launch FSD in Europe and China as early as next year, thanks to the latest developments in AI.

Finally, there's the matter of valuation to consider, and not all Magnificent Seven stocks are created equal. Alphabet and Meta Platforms are currently selling for 20 times and 24 times forward earnings, extremely attractive multiples, particularly in light of the opportunity. Amazon stock is selling for less than 3 times sales, which is also an appealing price. Tesla stock is expensive no matter how you slice it, at 90 times forward earnings and 7 times sales, so it isn't for every investor.

That said, if Tesla is the first to crack the code for self-driving cars, its current valuation may end up being meaningless.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Tesla. The Motley Fool has a disclosure policy.

Why Meta Platforms, Amazon, Alphabet, and Other "Magnificent Seven" Stocks Slumped on Friday was originally published by The Motley Fool