Wall Street Broadens AI Focus Beyond 'Magnificent 7' to 'FAB 10'

Key facts

• Wall Street is introducing a new 'FAB 10' grouping to capture the next phase of the AI trade.
• The 'FAB 10' includes the original 'Magnificent 7' plus SpaceX, OpenAI, and Anthropic.
• SpaceX recently had a record-breaking IPO, pushing its market capitalization higher.
• OpenAI and Anthropic are expected to IPO later this year with valuations potentially exceeding $1 trillion.
• The 'Magnificent 7' still represents a significant portion of the S&P 500 index.
• Alternative groupings like the 'AI Big 10' are also being discussed by strategists.

Wall Street is evolving its market shorthand beyond the 'Magnificent 7' to a new 'FAB 10' grouping, which includes SpaceX, OpenAI, and Anthropic, to better capture the ongoing AI trade. This shift comes in the wake of SpaceX's significant market debut, signaling a widening investor interest in leading AI and Big Tech companies.

The 'Magnificent 7', comprising Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla, defined the initial phase of the AI rally. However, with SpaceX's recent blockbuster listing and the anticipated IPOs of AI developers OpenAI and Anthropic, strategists are looking to a broader set of companies.

The 'FAB 10' (Frontier AI & Big Tech 10) label, coined by Vanda Research, aims to encompass these ten companies, reflecting the direction of the AI and technology sectors for the next decade. SpaceX contributes aerospace and satellite connectivity, while OpenAI and Anthropic lead in frontier AI model development.

While SpaceX is now the sixth most valuable company globally, OpenAI and Anthropic remain private but are expected to approach public markets with valuations potentially surpassing $1 trillion each. This means the 'FAB 10' is more of a conceptual grouping than a tradable basket for now.

Other groupings are also emerging, such as Bank of America's 'AI Big 10', which includes chipmakers like Broadcom, AMD, and Micron. Despite these new labels, strategists note that the 'Magnificent 7' remains a dominant force, accounting for approximately one-third of the S&P 500 index, indicating that investors are broadening their definition of AI leadership rather than abandoning the original group.