“Magnificent Seven” Tech Stocks Continue to Outshine S&P 500
The “Magnificent Seven” mega-cap tech stocks have maintained their dominant position in the market, significantly outperforming the S&P 500 over the past two years. This group, comprising Apple, Amazon, Alphabet, Microsoft, Meta Platforms, Nvidia, and Tesla, has demonstrated remarkable earnings growth, setting them apart from their peers.
In 2023, these tech giants achieved an impressive 36% earnings growth, while the rest of the S&P 500 experienced a 4% decline. A chart from Goldman Sachs illustrates the stark contrast between the trailing 12-month earnings per share of the Magnificent Seven and the broader S&P 500, underscoring the fundamental strength driving their stock prices.
The Roundhill Magnificent Seven ETF, which tracks these stocks, has delivered a staggering 129% return since April 2023, far surpassing the S&P 500’s 48% return over the same period. This outperformance is largely attributed to the robust earnings growth of these mega-cap tech companies.
Peter Oppenheimer, a strategist at Goldman Sachs, emphasizes that the dominance of these tech firms is rooted in their strong fundamental growth. Looking ahead, the Magnificent Seven is projected to grow earnings by 33% in 2024, compared to a modest 3% for the rest of the S&P 500.
The AI revolution has played a significant role in this earnings surge, particularly benefiting companies like Nvidia, which saw its net income skyrocket from approximately $6 billion to over $60 billion.
While the earnings growth of these tech giants is expected to moderate in the coming years, they are still forecasted to outpace the broader market. Consensus estimates project 18% and 16% earnings growth for the Magnificent Seven in 2025 and 2026, respectively, compared to 11% and 13% for the rest of the S&P 500.
As the market continues to evolve, investors and analysts will be closely watching these tech behemoths to see if they can maintain their stellar performance and market leadership.
