The Magnificent Seven's high valuations are considered "extreme" by Richard Bernstein Advisors, suggesting a potential market reversal that could create a unique investment opportunity in other areas. The firm also noted that the stocks' outperformance could be justified if they were unique, but that's not the case. The group's market cap fell by $250 billion on the first trading day of 2024, with Apple experiencing the largest decline.
Key takeaways:
- The 'Magnificent Seven' stocks, which include Amazon, Apple, Alphabet, Meta, Nvidia, Tesla, and Microsoft, had a combined market value of $11.7 trillion, equivalent to the combined stock markets of the UK, Canada, and Japan.
- The group of tech titans saw a 107% increase in returns in 2023, accounting for most of the gains in the S&P 500.
- There are concerns of a speculative AI bubble forming in the market, with mega-cap stocks like Microsoft, Amazon, and Nvidia potentially overvalued.
- The Magnificent Seven stocks have started 2024 with a collective market cap decline of $250 billion, with Apple experiencing the most significant drop, losing $100 billion in market value.