Key facts
- The Magnificent Seven stocks have collectively lost about 10% of their market value since late October.
- The S&P 500 has been flat, with gains in the other 493 stocks offsetting the tech giants' declines.
- Since 2019, the Magnificent Seven's value has grown 500%, compared to 130% for the rest of the S&P 500.
- In the first quarter, all Magnificent Seven stocks declined, with Microsoft experiencing the largest drop of 23%.
- Concerns about AI's impact on software, economic weakness, and geopolitical events contributed to the downturn.
The Magnificent Seven stocks, a group of prominent technology companies, have experienced a significant downturn, losing approximately 10% of their combined market value since hitting a symbolic peak of over $20 trillion in late October. This slump has contributed to momentum stocks experiencing their fourth worst performance in 22 years.
Despite the declines in these tech giants, the broader S&P 500 index has remained relatively flat. This stability is attributed to the strong performance of the remaining 493 stocks within the index, which have collectively offset the losses from the Magnificent Seven, at least until recent geopolitical events.
In the first quarter of the year, all seven companies saw their stock prices fall, with declines ranging from over 6% to 23%. Microsoft was the worst performer, with its stock sinking 23% amid investor concerns about how artificial intelligence might impact the software industry. However, the article notes that Microsoft is also a significant player in the AI space, with substantial investments in OpenAI and strong growth in its cloud computing business.
The article highlights the astonishing growth of the Magnificent Seven since 2019, with their combined market value increasing by 500%, far outpacing the 130% growth of the other S&P 500 stocks. This has led to the Magnificent Seven now comprising about 30% of the S&P 500's total market capitalization, up from 14% in 2019. The author expresses unease about the sustainability of this performance and notes that the Magnificent Seven have been underperforming since November.