Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla. If you’ve watched CNBC, intentionally or by chance, in the past two years, you may know these companies as the so-called Magnificent Seven, or in Wall Street parlance, the “Mag 7.”
These are all huge American technology companies that are investing heavily in artificial intelligence, but what makes them “great” is that their stock prices have skyrocketed over the past two years and now these seven companies This is because it has reached . Again, the S&P 500 includes 500 companies.
This level of stock market concentration is essentially unprecedented.
“If you go back in history, I don’t think there’s ever been a time when the top five, top seven, top 10 American companies have been so dominant,” said Michael Hartnett, chief investment strategist at Bank of America. said. The person who coined the term Magnificent Seven.
Presumably, even if some of these multibillion-dollar AI bets don’t work out the way these companies hoped, tech stocks won’t just crash.
“If they suddenly stumble, yes, it can immediately cause a big drop in the stock market, and it has an immediate impact on whether individuals get up in the morning or companies get up in the morning and say we’re going. ‘Either you spend more money or you spend less money,’ says Hartnett Sheard.
While this scenario may be eerily reminiscent of the dot-com bust of the early 2000s, there are clear similarities. But unlike Pets.com, “Mag 7” is actually making money right now. That’s an incredible amount.
“These companies have very strong balance sheets,” said Nelson Yu, head of equities at AllianceBernstein.
Investors are pouring money into the Magnificent Seven because they think AI is the next big thing. But while these investors may be right about AI, they may be wrong about timing, said Rob Arnott of investment firm Research Affiliates.
“Technological revolutions generally happen more slowly than expected,” Arnott says. “Humans by nature accept change gradually and don’t like it stuffed down their throats.”
The Internet didn’t conquer the world overnight. Probably robots won’t either.
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