By The “Magnificent Seven” group of megacap tech companies reached an unprecedented milestone as their collective valuation exceeded $18 trillion.
According to Dow Jones Market Data, their combined worth now surpasses the gross domestic product (GDP) of every country in the world, excluding the United States and China.
This incredible valuation milestone highlights the dominance of these tech titans — Tesla, Amazon, Alphabet, Meta, Nvidia, Apple, and Microsoft — which continue to lead the stock market despite concerns over high valuations and market volatility.
A stunning comeback fuels December surge
After a brief period of underperformance earlier this year, the Magnificent Seven roared back into the spotlight, bolstered by renewed investor confidence.
Notably, Tesla shares surged nearly 70% since early December, while Amazon, Alphabet, and Meta all reached record highs this week.
The gains have translated into a nearly 10% rally in the Roundhill Magnificent Seven ETF (MAGS) in December, according to FactSet, setting it on course for its strongest monthly performance since February.
This surge has coincided with broader market weakness, as the S&P 500 experienced its eighth consecutive session where decliners outnumbered advancers.
Source: MarketWatch
2025 outlook: Strength amid risks
As the Magnificent Seven heads into 2025, analysts expect their dominance to persist.
Wall Street projections indicate robust earnings growth for these tech leaders, significantly outpacing the rest of the S&P 500.
In a report by MarketWatch, Venu Krishna, head US equity strategist at Barclays says,
Even though we expect Big Tech earnings growth to moderate, it will still settle at very healthy levels and significantly above the rest of SPX
This optimism stems from the companies’ history of exceeding Wall Street’s expectations and their heavy investments in artificial intelligence (AI), which continue to drive innovation and revenue.
However, high valuations remain a double-edged sword.
The group trades at an average forward price-to-earnings (P/E) ratio of 40, compared to the broader S&P 500’s 22.
Tesla, for instance, commands a P/E ratio of 128.5, while Alphabet sits at a more modest 21.9.
Such lofty valuations could expose these stocks to selloffs if earnings fail to impress.
Regulatory and valuation concerns loom
Despite their strong position, the Magnificent Seven faces potential headwinds in 2025.
Growing regulatory scrutiny, particularly around AI investments and data privacy, could pose challenges.
Additionally, some analysts warn of an overheated market.
Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School, voiced caution during a recent CNBC interview. He said,
The surge in the Magnificent Seven over the last seven or eight days has been incredible.
Some of that enthusiasm for some of those stocks very well might unwind next year.
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