Is the party over for the Mag 7?
The Magnificent 7 – a group of companies dominating returns for the past three years – finally looks like it could be disbanding. Which of the seven would lead, which would lag and where should investors look next?
Investors on both sides of the Atlantic are likely to have come across the term ‘Magnificent 7’ – a moniker used to describe a group of ‘big tech’ companies that have dominated industry headlines and stock market returns in recent years.
These seven technology giants – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla – enjoyed a collective surge in share prices that began in 2023. Their impressive returns were powered by a massive appetite for all things artificial intelligence (AI), a concentrated US stock market and each demonstrating strong financial performance.
The Mag 7 represents around a third of the S&P 500 by market capitalisation. According to investment manager Mellon, in 2023 the group returned 76% against the wider S&P 500’s 24%. As of May 2026, their year-to-date performance is 8.8% compared with the overall S&P’s return of 8.1%.
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This suggests their relative success may be slowing, with several market commentators wondering if the collective party may be splintering.
Is the ‘Mag 7’ story over?
Neuberger Berman co-chief investment officer, multi-asset strategies Jeff Blazek said while Alphabet, Amazon and Meta all delivered Q1 results that surpassed analyst expectations, the cohesive performance of the wider group may have run its course.
“The ‘Magnificent 7’ moniker has had a good run. But the basket is beginning to break at the same time more granular AI-related equity stories are gathering momentum,” he said.
While several continue to impress, “the story of seven stocks moving in unison to dominate large cap indices may be reaching its end,” Blazek added.
All seven remain heavily exposed to AI, appetite for which shows no signs of easing. Quite the opposite, in fact.
Helen Jewell, international chief investment officer of fundamental equities at BlackRock, said AI looks set to continue to attract huge levels of investment.
“AI capital expenditure is now $725 billion for 2026 and we expect that to reach $6 trillion by 2030 – an extraordinary amount of money is being spent on AI.”
But she also points out that the expected divergence between the seven companies will be determined by their breadth of offering.
She said: “A company like Alphabet has more elements across that whole AI stack – computing, cloud, models, applications. Others are more exposed to the parts of the stack seen to be less strong. Software, for example, is seen as a weaker part of the AI story because there’s a feeling that AI will be able to replicate a lot of what software does.”
While the term was useful in describing their shared characteristics, Jewell said it will become outdated as the divergence that’s already started to emerge continues.
Where are the Mag 7 differences showing up?
While these acronyms can help investors looking for an interesting, memorable narrative, it’s important to look beneath the marketing story.
Neuberger Berman’s Blazek explained: “The Mag 7 story no longer reflects how these companies are actually behaving and it no longer serves investors trying to make sense of where markets are headed.”
He said their average pairwise correlations – the rate at which two stocks move together – have fallen significantly since their heyday.
In 2023, this was 75%, whereas it’s now 25% – the lowest level since 2019.
As at mid-May, Neuberger Berman said year-to-date returns ranged from Alphabet’s 23% to Tesla’s loss of 15% – a “striking” divergence in such a short timeframe.
“Consider Alphabet and Microsoft specifically: a year ago, the former was written off as lagging badly on AI, while the latter was deemed a consensus winner. That read has inverted – starkly,” Blazek said.
Beyond the Mag 7, where should investors look next?
Trying to second-guess markets or time share price movements is challenging – even for professional investors.
James Norton, head of retirement and investments at Vanguard Europe points out that people described Mag 7 valuations as being stretched for years. If anyone was spooked by that narrative they might have sold out and missed out on a lot of returns.
Clearly this year’s performance to date has been more mixed. As it’s hard to predict future share price trajectories, taking a diversified, long-term approach is more sensible than trying to time a specific theme.
Norton added: “For investors with a diversified portfolio, these companies are just one part of the picture. It is true that historically quite a small number of companies have driven a large share of overall market returns. But in a diversified portfolio, the Mag 7 are just a part of the returns of the US market, which are in turn part of the returns from the global market, which are again balanced by the returns you are also getting from bonds.”
Are the Mag 7 stocks overvalued?
Jewell doesn’t like calling stocks ‘expensive’.
“Ultimately the multiple reflects what people think the future earnings growth is going to be. The reason Alphabet is demanding a higher price is because there’s a feeling that its earnings growth is going to be strong because they've got so many different parts of the AI story,” she said.
The other point to note is that the divergence of performance starting to emerge is not a static story for these types of companies.
Their ambition, attitude and high levels of cash flow means their ability to continually reinvest themselves is part of their power.
Jewell added: “As the oldest of the Mag 7, Microsoft is a phenomenal company that has gone through many iterations. It reinvents itself continually – as does Apple – because they’ve got the cash to rethink and recreate what they do, which is what allows them to sustain for the long term.”
