There’s little that’s magnificent about the magnificent seven these days.
Although the S&P 500 only fell 9 per cent during the recent market sell-off, six of the so-called magnificent seven stocks – Nvidia, Alphabet, Microsoft, Amazon, Meta and Tesla – have fallen into official bear market territory, losing at least 20 per cent of their value.
Microsoft and Meta have led the way lower, losing more than 30 per cent of their value, with Microsoft enduring its worst quarterly performance relative to the S&P 500 since 2000.
Only Apple (a peak-to-trough decline of 14 per cent since October) has escaped this dubious distinction, and even it has underperformed the broader market.
Frustrated technology investors might protest that earnings tell a different story. FactSet data shows that six of the seven exceeded analyst expectations in the most recent quarter, with growth of 27 per cent well above expectations and far outpacing the 9.8 per cent growth rate for the other 493 S&P 500 companies.
It marked the 10th time in the past 11 quarters that the magnificent seven reported earnings growth above 25 per cent, says FactSet.
Tesla, as usual, was the exception: it missed estimates and carries a valuation far above its peers, highlighting how out of step it is with the rest of the group.
Tesla aside, the combination of rising earnings and declining stock prices means that valuation multiples have compressed significantly. Four of the seven – Microsoft, Meta, Amazon, and Nvidia – now trade below their historical norms, notes Bespoke Investment Group, with Meta and Amazon at extremely discounted levels.
The magnificent seven are not failing businesses, but investors have rotated away from high-flying tech. This year has accelerated a trend that began in 2025, when only two of the seven outperformed the wider market.
It had to happen at some stage. No sector or group can outpace the market forever. The magnificent seven’s era of effortless outperformance appears to be over.