Magnificent Seven, a 1960 blockbuster movie saw seven gunfighters hired by Mexican peasants to liberate their village from oppressive bandits. Today, seven stocks listed on the Nasdaq stock exchange are fueling the bull market run on Wall Street and have been its savings grace. Without these, the S&P 500 return would have been almost flat during the year.
The ‘Magnificent 7’, a new group of mega-cap tech stocks has propelled the S&P 500 into a bull market. From October lows, the S&P 500 index is up by over 20%. However, unlike the previous bull runs backed by FAANG stocks – Facebook (now Meta), Apple, Amazon, Netflix and Google (now Alphabet) – this time the ‘Magnificent 7’ stocks are getting all the attention. The stocks making the list of ‘Magnificent 7’ are Apple, Microsoft, Nvidia, Amazon, Meta, Tesla and Alphabet. Essentially, the FAANG list gets expanded with three newcomers, Microsoft, Nvidia and Tesla.
The ‘Magnificent Seven’ stocks account for around 90% of gains on Wall Street’s S&P 500 this year. Microsoft (MSFT), Apple (AAPL), NVIDIA (NVDA), Meta Platforms (META), Alphabet (GOOG, GOOGL), and Tesla (TSLA) make up around 55% of the NDX and 20% of the SPX. A little back-of-the-envelope calculation should be enough to show that the unchanged level of SPX would be a negative if not for those names.
In the first half of 2023, Big Tech stocks dominated US stock gains, which were sparked by a surge in interest in artificial intelligence (AI). The rise of artificial intelligence has been the main topic of discussion for equities investors for the majority of 2023. This development has contributed to a startling increase in the “Magnificent Seven” Big Tech firms market cap.
The overall market value of the “Magnificent Seven” group has increased by 60% this year, or $4.1 trillion, to an astounding $11 trillion thanks to a phenomenal tech-stock boom supported by excitement over artificial intelligence.
The frenzy over the so-called Magnificent Seven stocks is reaching fever pitch. However, it is still time for the ‘Magnificent Seven’ stocks to deliver what the FAANG stocks did for the global investors. “This hype is dangerous as it could lead investors to assume that these stocks are a silver bullet to build long-term wealth – and they are not, at least not on their own,” says Nigel Green, CEO, deVere group, one of the world’s largest independent financial advisory, asset management and fintech organisations.