Following the spectacular performance of FANNG companies, the market is bullish on the ‘Magnificent 7’, a new group of mega-cap tech stocks that includes Apple, Microsoft, Nvidia, Amazon, Meta, Tesla, and Alphabet. But, unlike FAANG stocks that saw their share price rally over a longer period, the performance of Magnificent 7 as a group appears to be fading.
S&P 500 is up over 30% ( yearly) and nearly 9.5% YTD, while the Nasdaq 100 has gained 45% and 8.5% so far in 2024.
Alphabet is underperforming Nasdaq while Apple and Tesla are down by 12% and 33% YTD.
Microsoft and Amazon are decently up and outperformed the index while Nvidia remains the leader with returns of 93% so far in 2024, with Meta at the second spot with a 42% return.
2024 saw the rush towards AI-led companies and their stock prices rallied. It seems the Magnificent Seven companies have been rewarded for effectively utilizing AI for earnings growth, while Apple and Tesla have been penalized for not doing so.
Is the story over for ‘Magnificent Seven’ stocks? “The Magnificent Seven tech stocks in the S&P 500 are more than just investments; they’re gateways to the future. With their stellar financial performance, early investments in AI, and unwavering commitment to innovation, these stocks are likely to be set for a continued bullish run,” says Nigel Green, CEO, deVere Group.
JP Morgan in a report says – The magnificent seven are a significant part of US and global stock markets, known for their past strong earnings. Investors should actively allocate within megacaps, focusing on companies with the best chance of meeting high earnings forecasts. Today’s market may, therefore, present a good opportunity to rebalance portfolios, to ensure returns are not ever more dependent on a handful of stocks – magnificent or not.