Keeping up with the Magnificent Seven

The ’Magnificent Seven’ tech-enabled stocks of Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Nvidia, and Tesla have been outperforming the broader market for more than a decade. It really has been a case of investors needing to keep up exposure to these companies to enhance portfolio returns.  

After a steep drawdown of roughly 25% in early April, the Magnificent Seven stocks have rebounded strongly to rise around 8% year-to-date, broadly in line with the S&P 500 index. But performance within this cohort varies significantly. Nvidia, Microsoft, and Meta Platforms have surged more than 20%, led by artificial intelligence (AI) momentum and solid business demand for related technology services and products. Amazon has made a modest 4% gain this year, while Apple has lost 14%, reflecting pressure from trade tariffs. Tesla, meanwhile, is the laggard with an 18% decline -potentially influenced by political dynamics and sluggish sales of electric vehicles. 

The roots of profitability amongst the Magnificent Seven companies trace back decades. The mid-1990s ushered in commercial internet browsers, followed by the rise of mobile data in the early 2000s and the cloud computing revolution in 2006. The post-Covid acceleration in big data, e-commerce and AI further cemented their dominance. In 2025 this is reflected in their earnings forecasts, for the second quarter, they are expected to post an aggregate annual earnings increase of 14%, compared to just 3% for the remaining S&P 493 constituents. Their financial leadership is not just a matter of trend—it’s a structural advantage.

Moreover, the technological efficiencies of the Magnificent Seven has rubbed off on US firms. As discussed in our June 2025 Investment Outlook, big data collected through apps, has enhanced corporate pricing power in some industries and has been used to minimise costs, such as optimising inventory management and reducing waste. Since March 2021, average underlying profits per worker among all US listed companies have grown at an annualised rate of 8%, compared to just 2% in the prior two decades—a productivity leap partly enabled by tech investment and digital infrastructure pioneered by these seven firms.

However, risks remain. Stock market concentration is chief among them: when most of the market’s gains come from just a few stocks, a single piece of negative news or a disappointing earnings report from one can pull down the entire index. These seven firms now represent 34% of the S&P 500's market capitalisation, with the broader IT sector reaching 33%—levels reminiscent of the dot-com bubble. Yet unlike that era, today US non-financial corporates in aggregate run a financing surplus, meaning they generate enough money to fund their investments. 

Valuation risk is another concern. The group trades at an average price-to-earnings ratio of 30 times, though still below the 2021 peak of 38. This compares to 19 times for the rest of the S&P 500. The ‘Magnificent Seven’ may seem expensive—but their earnings growth justifies the premium.

The Magnificent Seven remain essential to understanding market dynamics. With robust earnings, deep cash reserves, and strategic positioning in AI and cloud infrastructure, these firms present not only resilience but opportunity. For investors seeking exposure to growth and innovation. It is hard to ignore the attraction and potential further upside in these Magnificent Seven companies.