For much of the past year, the so-called Magnificent Seven (MAG7) stocks have been delivering market-leading growth.
The unofficial grouping of major tech firms, which includes Apple, Meta and Microsoft, led to 80% of the S&P 500’s gains in 2023 thanks to big developments in artificial intelligence (AI). So far this year, their performance has diverged somewhat. For example, while Nvidia stock has seen record growth off the back of a surge in profits, Tesla has been struggling to maintain its performance amid a sales slump.
Still, the MAG7 is still worth close to $13 trillion and is proving to be extremely popular among investors. And this is especially true for pension savers, new analysis from PensionBee has shown. The pensions provider has found that around 10% of defined contribution pots in the UK are invested in the tech titans.
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So, how much of your money is going towards the AI boom - and do pension savers have any power to make AI more ethically sound? We’ve looked at PensionBee’s findings to find out.
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How much of my pension is invested in the Magnificent Seven stocks?
PensionBee has found millions of pounds are likely to be funding the biggest tech companies on the planet. Using data from its own platform, as well as fellow default pension funds Nest and The People’s Pension, it found a typical UK saver could have £2,033 invested in the MAG7 stocks.
Working on the assumption that the typical UK pension pot contains £20,000, it found tech stalwarts Microsoft and Apple were attracting the highest level of pension investment out of the stock grouping. The pair’s allocation was £437 (2.6% of the typical pot) and £420 (2.5%) respectively, on average.
High-flying chipmaker Nvidia (£353, or 2.1%) and Google’s parent company Alphabet (£286, 1.7%) made up the third and fourth biggest investments. Amazon (£218, 1.3%), alongside younger upstarts Tesla (£168, 1%) and Facebook’s owner Meta (£151, 0.9%), rounded out the MAG7 investments.
Should you be worried about your pension's heavy MAG7 investment?
According to PensionBee, the Magnificent Seven are attracting such a high proportion of our pension money because of their consistency when it comes to growth and how they react to shocks in the wider market. They are also seen as long-term prospects, given their constant innovation, worldwide reach and sturdy balance sheets. This appeal is further enhanced by the diversity of sectors they operate in, from e-commerce to the automotive industry.
But while the financial reasoning is relatively sound, you may be concerned that your money is supporting unethical practices. After all, some MAG7 members have been attracting publicity for all the wrong reasons. For example, Meta boss Mark Zuckerberg recently apologised for the social media harms his platforms have been accused of causing children, while Amazon has repeatedly come under fire for its attitude to paying corporation tax and UK workers' rights.
PensionBee said a recent survey it had conducted had found misgivings among savers about the practices of some of these tech firms. Between 60% and 70% of those surveyed raised concerns about AI, citing its potential impact on news and human rights.
Ahead of 2024's AGM season, chief engagement officer at the provider Clare Reilly said it was “crucial” savers recognised that their interests are “intricately tied” to the tech giants. She said: “Through our pension savings, we’re all investors in the biggest tech giants that dominate our everyday lives – from our smartphones to the convenient online marketplaces we use to shop.
“Whether or not we actively monitor our investments, our retirements, and even our ability to retire at all, currently hinge upon the fortunes of these companies. Part of the reason they feature so heavily in pension funds is their scale, but also their financial performance. Love them or loathe them, our lives are inexorably linked to their success.”
Mag7 shareholders 'ignore' pension savers' AI concerns
PensionBee had said that savers may be able to engage with the firms they have unwittingly invested in during AGM season. It suggested its customers should attend the events to ask questions, write to the companies, as well as take part in investor advisory communities to provide feedback.
However, those who took up this advice and raised concerns about AI are likely to have been disappointed by the failure of shareholder resolutions at three Mag7 AGMs - those of Alphabet, Amazon and Meta.
During Alphabet's AGM, a resolution calling for an independent third-party human rights impact assessment of Google's advertising policies and practices garnered just 19% of the vote.
A separate one that called on the Google owner's board to put together a report that would assess the risks associated with generative AI and propose potential remedial measures, got just 18% of the vote. This was despite it being supported by 68% of people in an April 2024 PensionBee survey of 1,000 adults who have pension pots.
At the Amazon meeting, a shareholder resolution that urged the online giant's board to create a committee of independent directors to address the risks associated with AI only gained 10% of the vote. PensionBee found almost half (45%) of the people it had surveyed wanted such a resolution to pass.
Meta's AGM had a similar resolution to the generative AI one raised at Alphabet's meeting. It too failed to pass, winning just 17% of the vote.
Reacting to what's happened during the Mag7 AGM season, Reilly said: “The failure of these resolutions is a disappointment for pension savers who tell us that they are increasingly concerned about the ethical implications of AI.
“We see a strong desire among savers for greater accountability and transparency in how AI is developed and deployed by these tech giants. Their management teams have a responsibility to listen to these concerns and take action to mitigate potential risks. The rapid pace at which AI technology is advancing brings with it significant ethical and social considerations, and it’s imperative that these are not overlooked in the pursuit of innovation.
"PensionBee’s research shows that pension savers are not just passive investors; they are keenly aware of the broader impact of their investments and are calling for responsible stewardship from the companies in which they are invested. This is particularly crucial in the tech sector, where the decisions made today about AI could have far-reaching consequences for society.”
