Big tech stocks, in particular the ‘Magnificent Seven’, have come to dominate the stock market.
At the start of 2023, seven tech companies accounted for approximately a fifth of the S&P 500 between them. Two years on – having been constantly among the most-bought stocks in the world ever since – the group now comprises around 33% of the S&P 500 index.
This saturation means that, in effect, all investors are exposed to these big tech stocks. Whether or not you own them directly, any stock market tracker funds, the likes of which will likely form a large part of your pension, will have significant exposure to the Magnificent Seven group.
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However, with this oversaturation has come an increasing degree of pressure from the markets for these stocks to perform – and ‘to perform’ in this context means to continually post big earnings growth numbers. Investors have become accustomed to big tech stocks growing their numbers rapidly, and as such these stocks are under immense scrutiny.
“Investors are starting to drill down into more details for each of the seven stocks and they are no longer all racing ahead in unison on a good day for the markets,” says Dan Coatsworth, investment analyst at AJ Bell. “Regulatory pressures, antitrust concerns, economic headwinds and growing competition are all issues to consider.”
As such, there’s more reason than ever to understand the Magnificent Seven big tech stocks as individuals, rather than as one group.
Who are the Magnificent Seven stocks?
The Magnificent Seven – often abbreviated to ‘Mag7’ – comprises seven big tech stocks that the investing community perceives as being the leading exponents of technology in general and artificial intelligence (AI) in particular.
They are:
- Alphabet (NASDAQ:GOOGL) – the parent company of Google, as well as other companies such as the AI developers DeepMind and Anthropic;
- Amazon (NASDAQ:AMZN) – originally an online bookstore, now a giant of e-commerce and, via Amazon Web Services (AWS), cloud computing;
- Apple (NASDAQ:AAPL) – the tech hardware company that brought the world the MacBook and the iPhone;
- Meta (NASDAQ:META) – formerly Facebook, the company is now heavily focused on ‘Metaverse’ technology as well as AI products, like Llama model;
- Microsoft (NASDAQ:MSFT) – the computing giant behind the Windows operating system and the Azure cloud platform;
- Nvidia (NASDAQ:NVDA) – the hardware developer that pioneered GPUs, the chips that power AI data centres;
- Tesla (NASDAQ:TSLA) – the electric vehicle (EV) manufacturer that, according to CEO Elon Musk, is aiming to crack autonomous driving.
The term ‘Magnificent Seven’ was coined by Bank of America analyst Michael Hartnett in 2023. By then, the group was already starting to dominate the stock market in the wake of the AI and tech stock mania that followed the public launch of ChatGPT in late November 2022.
While each company is distinct, there are some general similarities that apply to most, if not all, of the group.
All are (or at least have been) incredibly innovative; Apple’s products have revolutionised personal computing, Meta made social media mainstream, and Tesla has demonstrated the viability of EVs.
Most are also highly diversified. Even if a specific product made a company like Meta or Amazon, these megacap companies now have their fingers in all sorts of technological pies – favourites being cloud computing and, of course, AI.
All the companies in the group are involved in AI, albeit in different ways and to varying degrees (Apple, for example, has drawn criticism for failing to develop its own AI products as fast as its counterparts).
Their key similarity, though, is their stock market dominance. At time of writing they comprise seven of the world’s eight largest companies by market cap, and the smallest of them by that metric – Tesla – is worth an eye-watering $1.32 trillion.
Latest Magnificent Seven News
The Magnificent Seven as a group received a major shock, along with the wider US stock market, in late January as Chinese AI start-up DeepSeek emerged as a cheaper alternative to ChatGPT.
As we’ll see, though, DeepSeek impacted the various stocks differently.
Alphabet
Alphabet’s share price fell 4.2% on 27 January, following the news that DeepSeek was able to outperform ChatGPT at a fraction of its financial and compute costs.
“We’ve seen internal concern from Google that OpenSource AI diminishes their business moat,” said Tom Bailey, head of research at HANetf.
Besides AI disruption, the shadow hanging over Alphabet is a threatened break-up of Google, following a US court ruling in August that the company’s search engine constitutes a monopoly. There are also concerns that AI might pose a threat to Google’s core search business over the long term.
Amazon
The market is yet to reach a verdict on whether DeepSeek represents a headwind or a tailwind for Amazon. Shares edged up slightly on January 27, but fluctuated as the week progressed.
On the one hand, reduced compute requirements for AI tools would be bad news for Amazon’s cloud division, AWS, but cheaper AI tools could provide a boost to its ecommerce business.
Shares gained 30.8% in the six months to 31 January.
Apple
Apple’s share price is up 7.9% in the six months to 31 January, but 6.4% down since the start of 2025. The DeepSeek shake-up played out well for Apple, cementing its position as the world’s most valuable company; its shares gained 3.2% on 27 January, while rivals Microsoft and Nvidia retreated.
However, weakening iPhone sales, particularly in China, have weighed on the stock, and this was brought to bear in its Q1 2025 earnings, announced on 30 January. Apple’s shares fell 0.5% in after-hours trading following the results.
Meta
Meta was another immediate winner from DeepSeek’s appearance on the AI scene.
“Meta’s scale, data advantage, and integration of AI into products like advertising and the metaverse ensured that, unlike its tech competitors, it was able to withstand the global sell-off in tech stocks,” wrote Kate Leaman, chief market analyst at AvaTrade, after the stock gained 1.9% on 27 January.
Meta’s earnings release on 29 January saw its share price gain 1.6% the following day, as CEO Mark Zuckerberg reiterated his conviction that positioning tools like Llama, Meta’s AI LLM which DeepSeek accessed via the open source model, was the right strategy for the company in the long term.
Microsoft
Microsoft delivered an earnings beat on 29 January, but saw its share price fall 6.2% the following session regardless.
Microsoft is particularly vulnerable to DeepSeek’s potential disruptive influence, as a major investor in OpenAI. Its Azure cloud business could also be disrupted by lower-compute AI, and this was a concern for investors with the division’s growth having weakened in the previous quarter.
Nvidia
Nvidia is, on the face of it, the Magnificent Seven stock with the most to lose from DeepSeek’s emergence; its share price fell 17% on 27 January.
The problem for Nvidia is that its share price has become hugely elevated as gen AI demand has driven revenues for its highly sophisticated GPUs. However, if generative AI models can be developed without relying on these, it suggests that the long term sales growth that has been priced into the stock may not materialise.
The 27 January decline wiped nearly $600 billion off Nvidia’s share price, the largest single-day market cap decline in stock market history. Shares are still up 15.8% over the past six months though.
Tesla
Despite missing on revenue and earnings expectations when it announced its latest results, Tesla’s share price gained 4% in after-hours trading and is up 81.7% over the past six months.
CEO Elon Musk promised that the company will make significant strides in both affordable EVs and autonomous robotaxis this year, the latter of which in particular is viewed as key to legitimising the company’s enormous valuation relative to earnings.
Are the Magnificent Seven a good investment?
Given all that, should you buy the Mag7 stocks?
The answer of course depends on your personal circumstances, investment goals, and risk appetite, but before investing in big tech stocks it is worth remembering that their oversaturation in the stock market and strained valuations mean that they are relatively risky investments, even given the fact that they are big, established and highly profitable businesses.
“Investing in the Magnificent Seven requires taking a view on what could go right and what could go wrong with each company,” says Coatsworth. “You then need to look at valuations and whether they’re expensive, fair or cheap compared with the growth on offer and factoring in the potential rewards and risks.”
| Stock | Trailing P/E ratio | Forward P/E ratio |
|---|---|---|
| Alphabet* | 27.08 | 23.64 |
| Amazon* | 50.82 | 40.41 |
| Apple* | 37.58 | 31.32 |
| Meta* | 28.88 | 27.31 |
| Microsoft* | 33.45 | 30.08 |
| Nvidia* | 47.41 | 30.55 |
| Tesla* | 198.33 | 135.27 |
| S&P 500 average^ | 25.52 | 22.33 |
| NASDAQ 100 average^ | 33.38 | 27.20 |
Sources: *Wall Street analyst estimates via stockanalysis.com as of 31 January 2025, ^Birinyi Associates analysis via Wall Street Journal as of 31 January 2025
At present, Meta and Alphabet don’t seem like unreasonable investments. Both are cheaper than the NASDAQ 100 average, relative to their expected earnings. Tesla, on the other hand, clearly has very high long-term growth expectations baked into its current valuation.
The argument in favour of buying Mag7 tech stocks is that their projected revenue and earnings growth are superior to the broader market. To reiterate, though, these expectations are baked into their prices already. Nvidia’s share price fell following its Q2 2025 earnings release despite the fact that it beat analysts’ expectations and issued above-expected guidance.
In other words, these companies have to post very big, positive surprises in order to see share price gains.
“Each company needs to show it is capable of sustaining growth in sales and profits and that margins are consistent or growing,” says Coatsworth, “otherwise, they might find it hard to keep investors on side.”
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