Market Observations

A Closer Look at Magnificent Seven Stocks

Market Observations Article
February 2024

Authors & Contributors

The mega-cap leaders known as the “Magnificent Seven” put on a solid performance in 2023.

Will they continue to dominate market returns this year?

A group of top tech stocks put on a "magnificent" show in 2023. With plenty of fuel from potential artificial intelligence (AI) advancements, many are wondering if these high performers will continue to dominate market returns.

Big-Tech Behemoths Hold Sway Over Indices

The mega-cap leaders dubbed the “Magnificent Seven” have outperformed the stock market for several years. However, 2023 was quite impressive for the seven tech-focused US companies—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla. Collectively, the Magnificent Seven climbed 75.71% during 2023, while the broader S&P 500® Index returned 24.23% for the year.

For the past five years, the Magnificent Seven has surpassed the gains of other stocks in the S&P 500® Index.

Source: Bloomberg, as of January 31, 2024

Despite a sluggish start at the beginning of 2024, most members of the Magnificent Seven bounced back by the end of January, with Tesla being the biggest laggard. The electric automaker’s recent drag on the performance of the group has analysts eyeing other possible contenders for its spot among the seven. Tesla saw earnings fall 40% from fourth-quarter 2022 to 71 cents per share in the fourth quarter of 2023.1 Meanwhile, others in the Magnificent Seven solidified their places at the top—Alphabet2 and Applereported year-over-year earnings growth of 56% and 16%, respectively, for their quarters ending in December 2023.

The bar for the Magnificent Seven remains high, but 2024 began with a mix of optimism and skepticism.

The bar for the Magnificent Seven remains high, but 2024 began with a mix of optimism and skepticism.

At the end of 2023, the group of stocks accounted for about 28% of the S&P 500® Index’s total weight. With several exchange-traded funds (ETFs) and mutual funds tracking the index, investors holding an S&P 500® Index fund are likely heavily concentrated in the Magnificent Seven.

Index weight of top 7 companies in the S&P 500® has grown over time.

Index weight of top 7 companies in the S&P 500® has grown over time.

The combined market cap of the seven at around $12.3 trillion is more than four times the size of the nearly $3 trillion market cap4 of the Russell 2000® Index, which consists of 2,000 small-cap stocks.

Although the Magnificent Seven’s impact is especially profound in the US, the group’s influence is worldwide. For 2023, the stocks contributed 39.8% to the total return of 22.8% of the MSCI ACWI Index5, the global equity index with large- and mid-cap representation across developed and emerging markets.

Further context on the size of the Magnificent Seven: The group has become larger than the equity markets of entire countries. Together, the Magnificent Seven has nearly the same market capitalization of the stock markets in the UK, Canada and Japan combined. Microsoft, with a market cap of nearly $3 trillion, on its own is worth more than the entire Canadian stock market (WCAU CAN Index).

Magnificent 7 stocks are now roughly equal to the size of Japan, Canada and the UK's stock markets.

Magnificent 7 stocks are now roughly equal to the size of Japan, Canada and the UK's stock markets.

Challenges and Risks for Index Investing

While the recent performance of the Magnificent Seven has thrust the group into the spotlight, we believe investors should be aware of the possible challenges that could come with investing in the Magnificent Seven.

In our view, it is important for investors to keep in mind that the mighty can fall. Think back not so long ago to 2022, when the Magnificent Seven (UBXXMAG7) finished the year down double digits along with other major indices.

The Magnificent Seven finished 2022 lower, as did major indices.

Source: Bloomberg, 12/31/2021-12/30/2022.

Also, there are potential investment risks associated with these benchmark-index heavyweights including:

  • high concentration leading to lower diversification of broad indices,
  • index sector weightings skewed more heavily towards tech,
  • potential for style drift in large-cap benchmarks, and
  • a heavy growth leaning that can reduce index dividend yield (growth companies tend to pay out lower/no dividends).

Additionally, due to the Magnificent Seven’s global nature, factors such as economic growth rates, geopolitics and regulation could impact stock performance. 

Artificial Intelligence as a Secular Growth Trend

Positioned at the cutting edge, the Magnificent Seven span business functions across the Information Technology, Consumer Discretionary and Communication Services sectors. However, AI was the big story in 2023. AI has been around for many years in forms such as recommendation algorithms and voice assistants, but due to developments in machine learning the leap in 2023 was the broader adoption of generative AI, which specializes in creating content.

All Magnificent Seven companies announced AI developments with Microsoft, Alphabet and Meta introducing large language models and chatbots of their own, Amazon incorporating AI tools into Amazon Web Services (AWS) and NVIDIA becoming a frontrunner in AI chip development. Tesla and Apple are also looking at ways to incorporate AI into their product offerings.

Will The Magnificent Seven Continue to Dominate?

Outside of product development, the group of seven has demonstrated strong fundamentals. While the broader market faced struggles in recent years due to the rate-hiking environment, the Magnificent Seven, through cost-cutting measures, strengthened their balance sheets and investments in research and development. More could be on the horizon for the Magnificent Seven as demand is expected to grow for new developments in AI and other technology.



1Source: Tesla Q4 and FY 2023 Update,

2Source: Alphabet Q4 2023 Earnings Release,

3Source: Apple Q1 2024 Earnings Release,

4Source: FTSE Russell

5Source: MSCI


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