Big drops in two of the Magnificent Seven stocks haven't dented the group's influence on the S&P 500. In fact, the trendy stocks dominate now more than ever.
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The seven megacap stocks — Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOG), Amazon.com (AMZN), Meta (META) and Tesla (TSLA) — account for 29.7% of the S&P 500 as of April 17, says Datatrek Research. That's up from the group's 27.9% weight in the S&P 500 in 2023.
Seeing the group's hold over the world's most popular index grow this year might surprise you. Shares of Tesla are down 37.4%.
"Despite all the buzz around the death of the 'Magnificent 7,' U.S. big tech is actually a more dominant force in American stock markets than at the end of 2023," said Nicholas Colas of Datatrek in a report.
The Rise Of AI
Tesla isn't the only Magnificent Seven stock in the dumps. Apple is off more than 12%.
So why is the Magnificent Seven still such a big deal? You can thank AI. AI chip wunderkind Nvidia has seen its position in the S&P 500 rise to 5.1%, up from just 3.1% at the end of 2023. "Nvidia's incremental weight since the end of last year more than makes up for those declines," Colas said.
Additionally, five of the Magnificent Seven stocks are up this year. That includes Microsoft, which is also pressing in AI. "Weightings for the other 4 names are also higher this year," Colas said.
Had investors simply owned the Magnificent Seven stocks this year, they'd be up 14% vs. just 5% with the S&P 500.
"For better or worse, Big Tech is still the most important swing factor in S&P 500 index returns," Colas said.
What's Next For Magnificent Seven?
Much of the Magnificent Seven's future hinges on their upcoming first-quarter profit reports. All but Nvidia's are due out in the next few weeks.
On the plus side is Microsoft. "Microsoft ... has historically done well in response to first-quarter earnings," said Bespoke Investment Group. "Microsoft has beaten earnings per share and sales estimates on each of its last six first-quarter reports going back to 2018, and shares have traded higher on the day following in 10 of the last 12 first-quarter releases."
Unfortunately, Tesla tends to struggle in the first quarter's report. Tesla is "a name that has had a rough go of it when it comes to its first-quarter earnings releases," Bespoke said. "Tesla has fallen pretty significantly on seven of its last eight first-quarter earnings reaction days going back to 2016."
Expect lots of drama, though.
"On average these stocks tend to gap up at the open following their earnings releases but then sell off a bit during regular trading hours," said Bespoke Investment. "If you see these names trading sharply higher after hours or pre-market following earnings, it's best to not chase once the market opens for trading."
The Magnificent Seven's Rising Fortunes
| Company | 2023 S&P 500 weighting | 2024 weighting |
|---|
| Microsoft | 7.0% | 7.3% |
| Apple | 7.0% | 5.8% |
| Nvidia | 3.1% | 5.1% |
| Alphabet | 3.8% | 4.0% |
| Amazon | 3.4% | 3.9% |
| Meta | 2.0% | 2.6% |
| Tesla | 1.7% | 1.0% |
| Total/Average | 27.9% | 29.7% |
Sources: Datatrek Research, S&P Global Market Intelligence
FAQs
The mega-cap leaders dubbed the “Magnificent Seven” have outperformed the stock market for several years. However, 2023 was quite impressive for the seven tech-focused US companies—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla.
What are the magnificent 7 stocks in the S&P 500? ›
Dubbed the Magnificent Seven stocks, Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla lived up to their name in 2023 with big gains.
What are the Faang 7 stocks? ›
This group consists of Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla. Like the characters in the 1960 movie from which the name is taken, these companies are presumably the seven biggest and baddest “gunslingers” in the tech world.
Should you just invest in the magnificent 7? ›
Risks of investing in the Magnificent 7 stocks
The Magnificent 7 stocks have performed extremely well in recent years, generating outstanding returns for long-term shareholders. But good returns in the future are not guaranteed and there are risks to be aware of.
How to buy the magnificent 7 stocks? ›
Option 1: The first option you have for buying the Magnificent Seven stocks is to simply buy stock in each of the seven companies — Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA). Roundhill Financial Inc.. MAGS Magnificent Seven ETF.
What is the best ETF for Magnificent 7? ›
Here Are the "Magnificent Seven" ETFs to Buy in 2024 – Which Is Best for You?
- Vanguard Total Stock Market ETF. ...
- Vanguard S&P 500. ...
- Vanguard Total International Stock ETF. ...
- Vanguard Total Bond Market ETF. ...
- Invesco QQQ Trust. ...
- Vanguard Growth ETF Shares. ...
- Vanguard Developed Markets ETF.
At the median, analysts see upside in every Magnificent Seven stock, but none more so than Alphabet. In other words, Wall Street views Alphabet as the single best Magnificent Seven stock to buy now.
Is magnificent 7 overvalued? ›
Investors' concerns that the Magnificent Seven bubble may soon be about to burst could be completely unfounded, according to new analysis from JPMorgan, which argues the top-performing tech stocks are actually undervalued compared to rival stocks.
Which magnificent 7 stocks pay dividends? ›
Microsoft (MSFT 0.97%) Apple (AAPL -0.34%) Nvidia (NVDA 1.51%) Alphabet (GOOGL 0.99%) (GOOG 1.05%)
What is replacing FAANG stocks? ›
The "Magnificent 7" has emerged as a replacement for FAANG stocks. Sept. 6, 2024, at 3:22 p.m. Thanks largely to the success its iPhone smartphones, Apple shares have generated a 912% total return in the past decade.
Is it good to invest in FAANG stocks? All FAANG stocks have generated huge returns for investors previously because of their growing market cap. They are still growing, making them some of the most desirable shares in the market. However, their share prices are also very high.
Does Vanguard have a magnificent 7 ETF? ›
The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) focuses on mega-cap growth stocks. The Vanguard Growth ETF (NYSEMKT: VUG) focuses on large-cap growth stocks. The Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) focuses on S&P 500 growth stocks. Unsurprisingly, all three ETFs own all of the Magnificent Seven stocks.
How much of the S&P 500 return is from Magnificent 7? ›
(All seven “Magnificent Seven” stocks as a collective accounted for 64.3% of S&P 500 market cap growth for the first half of the year.)
What do billionaires invest in the most? ›
Billionaires' wealth is concentrated in company stock, and their companies' value lies mostly in ideas and processes, not cash and physical property. The economy depends on some people having more than they need to consume, as their investments of capital fund business operations and private lending.
What are the top 7 stocks to buy now? ›
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| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| UnitedHealth Group (UNH) | 1.27 | Strong Buy |
| Nvidia (NVDA) | 1.30 | Strong Buy |
| Microsoft (MSFT) | 1.32 | Strong Buy |
| Amazon.com (AMZN) | 1.34 | Strong Buy |
15 more rowsWith that in mind, let's have a closer look at the "Magnificent Seven" stocks -- Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), and Tesla (NASDAQ: TSLA) -- to see how their valuations compare to one ...
What are the best S&P 500 stocks to buy? ›
Sign up for Kiplinger's Free E-Newsletters
| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| UnitedHealth Group (UNH) | 1.27 | Strong Buy |
| Nvidia (NVDA) | 1.30 | Strong Buy |
| Microsoft (MSFT) | 1.32 | Strong Buy |
| Amazon.com (AMZN) | 1.34 | Strong Buy |
15 more rowsThe Big Seven is a group of non-partisan, non-profit organizations whose members include United States state and local government officials: Council of State Governments. International City/County Management Association. National Association of Counties.
What are the Fab 4 stocks? ›
What Are The Fab 4 Stocks? The Fab Four stocks in the realm of tech investing are Nvidia, Amazon, Meta Platforms and Microsoft. These companies are renowned for their advancements in AI and are widely regarded for their growth potential.
