These Stocks Could Bump Out the Magnificent 7 — Why You Should Invest Now
Written by
Yaël Bizouati-Kennedy
Edited by
Maria Concepcion
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The stocks in the group, known as the Magnificent Seven, have helped buoy the market in 2023 and contributed to the majority of the S&P 500’s returns last year.
They now make up about 30% of the S&P 500, a historic concentration of the largest stocks in the market, as 24/7 Wall Street reported.
The companies — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have business models heavily dependent on technology and the current excitement around artificial intelligence (AI), as JPMorgan noted.
Yet, while 2024 was off to a good start for the group, some stocks are starting to lag, making some wonder whether the Magnificent Seven is now down to a “fab four,” as The Wall Street Journal puts it.
Indeed, Michal Collins, founder and CEO of WinCap Financial, recently wrote in a blog post that while the market may have been previously influenced by the performance of the “Magnificent Seven” tech stocks, the dominance of these companies has waned in the first quarter, with steep declines in Tesla and Apple.
“Apple, currently approaching a staggering $3 trillion in market cap, has been facing a new challenge. The U.S. Department of Justice has taken legal action against Apple, alleging monopolistic practices within its iPhone ecosystem,” he wrote.
As for Tesla, the company announced its first quarter deliveries on April 2, which was “an unmitigated disaster,” according to Wedbush Securities analyst Dan Ives.
“We view this as a seminal moment in the Tesla story for Musk to either turn this around and reverse the black eye 1Q performance. Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative,” Ives wrote in an April 2 note.
It’s also important to note, as Peter C. Earle, senior economist at the American Institute for Economic Research, underscored, that “the market is at record highs with a lot of uncertainty to get past over the next six to eight months, so one should consult a financial advisor before making any investment decisions.”
Against that backdrop, which stocks could potentially replace them?
Broadcom
- Up 25.6% year-to-date as of April 4
- Up 115% in the past year as of April 4
According to 24/7 Wall Street, it’s already larger than Tesla and has had strong price appreciation recently. In addition, the company is strongly associated with AI, and it recently reported that AI revenue should top $10 billion this year.
Adobe
- Down 14.3% year-to-date as of April 4
- Up 29% in the past year as of April 4
Adobe is smaller but has strong ties to generative AI that could make it a media darling if it continues performing, according to 24/7 Wall Street.
ServiceNow
- Up 10.4% year-to-date as of April 4
- Up 59.5% in the past year as of April 4
ServiceNow is small in comparison, with a $155 billion market cap, but it’s another stock with a strong association with AI that could become the poster child of another SaaS-stock rally, 24/7 Wall Street reported.
Salesforce
- Up 18.9% year-to-date as of April 4
- Up 54.5% in the past year as of April 4
Following strong earnings announced in February, Wedbush Securities’ Ives wrote in a note that the company was “in a position of strength heading into FY25,” and demonstrated “solid results with AI on doorstep.” Wedbush has an Outperform rating on the stock.
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