Big tech stocks - are the 'Magnificent 7' worth investing in?

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

Alphabet

Alphabet’s share price was boosted in early December on news that it had developed a “breakthrough” quantum computing chip called Willow. GOOGL shares gained 5.1% on 10 December following the news, then (temporarily) jumped another 5.5% the following day on the announcement of Gemini 2.0, its latest AI model.

However, 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.

Amazon

Amazon’s satellite operation Project Kuiper is moving closer to launching a broadband service in the UK, in direct competition with Starlink, the satellite internet division of Musk's SpaceX, according to the FT.

Shares have gained 13.8% over the last six months, gaining 1.9% on 6 January following the Kuiper news.

Apple

Apple’s share price has gained 8.2% over the past six months, though it has fallen 2.8% since the start of 2025. It is, right now, the world’s most valuable company, but over the past year that crown has at various times been ceded to Nvidia, which once again looks like it is bearing down on Apple’s market cap.

Meta

Underscoring the perils of competing in the AI space at speed, Meta has been forced to delete many of its AI chatbots after human users complained of sloppy imagery and dishonesty in their interactions, according to CNN. A bug had been preventing human users from blocking the accounts.

Liz Sweeney, a spokesperson for Meta, told CNN via email that the accounts were “part of an early experiment we did with AI characters” and that Meta had “identified the bug that was impacting the ability for people to block those AIs and [is] removing those accounts to fix the issue”.

It hasn’t hurt Meta’s share price, though, which gained 1.2% on 6 January following the report, and is up 16.7% over the past six months.

Microsoft

Reuters reported on 7 January that Microsoft is set to invest $3 billion into India, in a bid to expand its AI capacity in the country. Microsoft's share price is down 8.5% over the past six months, though, with big spending on AI currently generating little in the way of returns, besides a reported $2 billion annual run-rate for coding subsidiary GitHub.

Nvidia

CEO Jensen Huang gave the keynote speech at the CES technology conference in Nevada on 6 January, and announced the launch of a new AI chip – the GB10 – alongside a new GeForce RTX 5090 graphics card for desktop PCs.

Nvidia’s shares gained 6.1% on the day, and are up 18.8% over the past six months.

Tesla

Tesla’s share price fell on 2 January following news of its first annual fall in vehicle deliveries since 2011. However, the stock has been buoyed by Musk’s close association with incoming president Donald Trump, gaining 63.4% over the past six months.

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.”

Sources: *Wall Street analyst estimates via stockanalysis.com as of 6 January 2025, ^Birinyi Associates analysis via Wall Street Journal as of 3 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.”