Topline
The āmagnificent sevenā group of massive technology stocks largely behind 2023ās record rally is showing cracks, as a trio of the septet are in the red this year and one memberās returns puts it head and shoulders above its peers.
Key Facts
Apple, Microsoft, Nvidia, Tesla, Meta, Alphabet and Amazon each outgained the broader market in 2023, but itās been a mixed bag for the group over the first eight weeks of 2024 even as indexes sit at record highs.
Alphabet (down 2% year-to-date through Monday), Apple (down 6%) and Tesla (down 20%) have wildly underperformed the market, while Nvidia (up 60%), Meta (up 36%) Amazon (up 15%) and Microsoft (up 9%) have all outrun the broader market.
Though Teslaās brutal selloff and negative profit trajectory have led to some questions about its inclusion in the magnificent seven ā Berkshire Hathaway and Eli Lilly have recently surpassed it in market value to become the seventh- and eighth-biggest American companies ā the septetās importance to the broader market remains supreme.
The magnificent sevenās combined market capitalization of $13.2 trillion accounts for some 29.2% of the S&P 500ās total market cap of about $45 trillion, skewing the results of the market cap-weighted S&P significantly.
Dating back to the end of 2022, the median return of the 493 S&P components not included in the magnificent seven is 13%, far below the S&Pās 35% return owing to the magnificent sevenās average return of 154%.
Surprising Fact
Nvidiaās $754 billion in market cap gained during the first two months of 2024 is larger than the entire market value of the 72 smallest companies included on the S&P, according to FactSet data.
Tangent
Some analysts are beginning to look at magnificent seven companies in the lens of performance compared to their siblings in that group, rather than compared to companies offering similar products. In a viral Monday note cautioning about Alphabet stockās prospects, Melius Research analysts Ben Reitzes and Nick Monroe wrote that āother companies in the Mag 7 are outflankingā Alphabet.
Key Background
Apple sells iPhones; Microsoft sells cloud computing services; Amazon delivers packages; Tesla sells cars; Nvidia designs semiconductors; Alphabet lives in online search and Meta is in the business of social media. But their massive valuations and profits make the seven companies closely-related peers. The magnificent seven notably helped lift markets out of a brutal 2022 selloff in the face of higher interest rates, with optimism about the groupās ability to capitalize on artificial intelligence driving the surge from the S&P, Dow Jones Industrial Average and tech-heavy Nasdaq stock indexes to respective all-time highs.