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The Magnificent 7 stocks are a group of mega-cap stocks that drive the market’s performance due to their heavy weighting in major stock indexes such as the Standard & Poor’s 500 and the Nasdaq 100. The group’s seven stocks earned their name in 2023 due to their strong performance and ability to power indexes higher seemingly without help from smaller stocks.
The Magnificent 7 includes the following stocks:
- Apple (AAPL)
- Microsoft (MSFT)
- Alphabet (GOOG and GOOGL)
- Amazon (AMZN)
- NVIDIA (NVDA)
- Tesla (TSLA)
- Meta Platforms (META)
The Magnificent 7 overlaps significantly with so-called FAANG stocks, with the former group all titans of tech and one of the highest-growth sectors of the economy. The advent and promise of artificial intelligence (AI) helped this group of stocks remain strong throughout 2023 amid high interest rates that pulled down many small- and mid-cap stocks. So the Magnificent 7 stocks became something of a rebellious group of equities that refused to decline with the rest.
While analysts think AI has the potential to drive significant profits for many of these companies, some suspect the valuations on these high-tech stocks have gotten ahead of the reality of AI. AI is a game-changer, but the Magnificent 7 may be pricing in much of that value already.
Why are the Magnificent 7 so popular?
The Magnificent 7 are popular for a few major reasons, due to their operational performance, stock performance and the future prospects of AI:
- Operational performance: The mega-cap tech stocks have among the world’s strongest business models, with products used by billions of people in some cases. They have established businesses, deep financial resources and can continue to grow.
- Stock performance: These stocks’ performance earned them their Magnificent 7 moniker, as they pushed higher in 2023, due in part to their association with AI. While the stocks of smaller companies fell, these big names seemed to keep rising.
- AI prospects: These companies stand to be huge beneficiaries of AI technology, whether they’re providing services based on the tech or the chips that power it.
Magnificent 7 stocks dominate major indexes
The Magnificent 7 comprise a huge portion of major indexes such as the and the Nasdaq 100, meaning their performance has an outsized impact on these market-cap-weighted indexes. Here’s how much of the S&P 500 they comprise, according to Slickcharts (as of May 6, 2024):
- Apple – 6.18 percent
- Microsoft – 7.02 percent
- Alphabet – 4.23 percent
- Amazon – 3.95 percent
- NVIDIA – 5.09 percent
- Tesla – 1.17 percent
- Meta Platforms – 2.31 percent
Add up those components and these seven stocks deliver 29 percent of the S&P 500’s performance. Meanwhile, the S&P 500’s other 490-some stocks deliver the remaining 71 percent. As great as this weighting is, it’s even more lopsided in the Nasdaq 100:
- Apple – 8.09 percent
- Microsoft – 8.63 percent
- Alphabet – 5.56 percent
- Amazon – 5.53 percent
- NVIDIA – 6.34 percent
- Tesla – 2.50 percent
- Meta Platforms – 4.52 percent
Total those all up and the Magnificent 7 stocks represent about 41 percent of the Nasdaq 100’s performance. In fact, this weighting is down significantly – from above 50 percent – because the Nasdaq index instituted a special rebalancing in mid-2023. The rebalancing was intended to reduce the massively outsized impact a handful of stocks have on the index.
Each time you purchase mutual funds or exchange-traded funds based on these indexes, you’re buying a similarly sized stake, albeit indirectly, in these Magnificent 7 stocks. Even if you’re buying funds based on other indexes, these seven names often dominate those funds, too. For example, the best index funds have significant weightings in the Magnificent 7.
Bottom line
The Magnificent 7 stocks have been a huge driver of the performance of major stock indexes and will likely continue to be for a long while. If you’re thinking about buying index funds, you want to understand how much impact these heavy hitters have on an index’s performance.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
FAQs
Shares in just seven companies—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, known collectively as the “Magnificent Seven”—have accounted for a significant portion of the U.S. equity market's return in recent years.
What is the magnificent 7 in stocks? ›
Shares in just seven companies—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, known collectively as the “Magnificent Seven”—have accounted for a significant portion of the U.S. equity market's return in recent years.
What are the magnificent seven dividend stocks? ›
With 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 7 stocks are driving the S&P 500? ›
The Magnificent Seven stocks are a group of high-performing and influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla. Bank of America analyst Michael Hartnett used the film name in 2023 when commenting on these seven firms.
What is the market cap of the magnificent 7 stocks? ›
Market Capitalization Over Time
As of July 2024, the Magnificent Seven companies are worth $15.4 trillion combined. The below table shows their market capitalization from 2000 to 2024 in billions of dollars. Source: CompaniesMarketCap.com, Yahoo Finance.
What are the magnificent 7 stocks for 2024? ›
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. But the third quarter of 2024 showed their returns diverging and the whole group came under selling in recent weeks before rebounding.
Should I just buy magnificent 7 stocks? ›
Concentration: If you're investing in just seven stocks, you have a lot riding on just a few outcomes. Even index fund investors face risks from the rising concentration of the Magnificent 7 stocks in their portfolios. You may want to look for ways to diversify and reduce some of your exposure.
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.
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.
Is there an ETF without the Magnificent 7? ›
Why the Invesco QQQ ETF is a great alternative to the Magnificent Seven. The Invesco QQQ ETF is a passively managed exchange-traded fund (ETF) that tracks the performance of the Nasdaq-100 index. The index is weighted heavily toward tech stocks, with nearly 60% of its holdings in the sector.
Add up those components and these seven stocks deliver 29 percent of the S&P 500's performance. Meanwhile, the S&P 500's other 490-some stocks deliver the remaining 71 percent.
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.
What are the magnificent seven megacap tech stocks? ›
Big-Tech Behemoths Hold Sway Over Indices
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 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.
What is the power of 7 in investing? ›
The 7-Year Rule for investing is a guideline suggesting that an investment can potentially grow significantly over a period of 7 years. This rule is based on the historical performance of investments and the principle of compound interest.
What would the stock market performance be without magnificent 7? ›
As highlighted in the chart below, the Magnificent Seven, which adds Tesla (TSLA) to the aforementioned six stocks, is up 51% on an equal weight basis. Without these seven stocks, the S&P 493 (ex Magnificent Seven) would only be up 8.3%.
What is famous magic formula in stock market? ›
Calculate each company's return on capital [EBIT ÷ (Net Fixed Assets + Working Capital)]. Rank selected companies by highest earnings yields and highest return on capital. Buy two to three positions each month in the top 20 to 30 companies, over the course of a year.
