In recent times, a select group of companies, known as the “Magnificent 7,” have been driving a significant portion of the stock market’s returns. These seven companies, which are among the largest in the S&P 500 index, collectively represent over 30 percent of the index’s market value as of mid-2024.
Here’s a closer look at the Magnificent 7 and how investors can tap into these tech giants.
What are the Magnificent 7 stocks?
The Magnificent 7 refers to seven tech stocks that have been key drivers of the stock market’s performance in recent years, with some reaching multi-trillion dollar valuations. Let’s explore the companies that make up this elite group.
*Note: Data as of early July 2024.
1. Apple (AAPL)
Apple is renowned for its consumer tech products like the iPhone and boasts a globally recognized brand. The company reported $383 billion in sales for its fiscal year 2023, with Warren Buffett’s Berkshire Hathaway among its top investors.
- Market cap: $3.6 trillion
- Stock price: $232.01
- 5-year return (annualized): 35.9 percent
2. Microsoft (MSFT)
Microsoft is a leader in software offerings such as Microsoft Office and has expanded into the video game sector with Xbox and the acquisition of Activision Blizzard in 2023. The company is also poised to benefit from AI through its stake in OpenAI, reporting nearly $212 billion in revenue for fiscal year 2023.
- Market cap: $3.5 trillion
- Stock price: $464.30
- 5-year return (annualized): 28.2 percent
3. Nvidia (NVDA)
Nvidia has thrived in the AI boom with its advanced chips in high demand, recording around $27 billion in revenue for fiscal year 2023. The stock has been a standout performer, delivering substantial returns to shareholders.
- Market cap: $3.3 trillion
- Stock price: $134.38
- 5-year return (annualized): 101.8 percent
4. Alphabet (GOOG and GOOGL)
Alphabet, parent company of Google, earns most of its $307 billion revenue from advertising. It also has a cloud business, YouTube, and various other ventures under “other bets.”
- Market cap: $2.4 trillion
- Stock price: $192.83
- 5-year return (annualized): 27.7 percent
5. Amazon (AMZN)
Amazon, the world’s largest online retailer, has a significant presence in cloud computing with Amazon Web Services. The company reported approximately $575 billion in revenue in 2023, with Jeff Bezos ranking as the second-richest person in the world as of July 2024.
- Market cap: $2.1 trillion
- Stock price: $199.49
- 5-year return (annualized): 14.9 percent
6. Meta Platforms (META)
Meta Platforms, parent company of Facebook, Instagram, and WhatsApp, generated nearly $135 billion in revenue in 2023. The company is investing heavily in AI capabilities, with its stock hitting new highs in 2024.
- Market cap: $1.4 trillion
- Stock price: $535.89
- 5-year return (annualized): 21.7 percent
7. Tesla (TSLA)
Tesla, known for its electric vehicles, recorded nearly $97 billion in revenue in 2023. CEO Elon Musk currently holds the title of the world’s richest person as of July 2024.
- Market cap: $844.1 billion
- Stock price: $264.69
- 5-year return (annualized): 76.5 percent
How to invest in the Magnificent 7 stocks
Investing in the Magnificent 7 stocks is straightforward, and you may already have exposure to them without realizing it. Here are the primary ways to invest in these tech giants.
- Invest directly in the stocks. You can easily invest in any of the Magnificent 7 stocks through an online broker by placing a trade order using the stock’s ticker symbol and desired number of shares. Explore Bankrate’s list of top online stock brokers.
- Invest in index funds. If you hold index funds tracking the S&P 500 or Nasdaq 100, you likely already have significant exposure to the Magnificent 7 stocks. These companies constitute a substantial portion of these indexes, making them a part of your portfolio.
- Invest in Magnificent 7 ETFs. Some funds exclusively focus on investing in the Magnificent 7 stocks. While these funds offer concentrated exposure, they may not provide sufficient diversification for most investors. Consider buying individual stocks if you are interested in this group.
Risks of investing in the Magnificent 7 stocks
While the Magnificent 7 stocks have delivered impressive returns, future performance is not guaranteed, and there are risks to consider.
- Valuations: Many of these stocks trade at premium valuations, which could impact their future growth. While supported by strong earnings and competitive positions, some of this may already be factored into their prices.
- Size: These companies face challenges in sustaining high growth rates due to their already immense size. Achieving significant market value increases becomes increasingly difficult as they grow larger.
- Competition: Market leaders constantly face competition that can threaten their positions. Whether from existing rivals or new entrants, these businesses are not immune to challenges that could affect their dominance.
- Concentration: Investing in just seven stocks concentrates risk on a few outcomes. Even index fund investors are exposed to the rising concentration of the Magnificent 7 stocks. Diversification strategies can help mitigate this risk.
Editorial Disclaimer: Investors are encouraged to conduct independent research on investment strategies before making decisions. Past performance does not guarantee future price appreciation.