The S&P 500 had another great year in 2024, rising more than 20% for two consecutive years, a feat achieved in the 1990s. And just like last year, a small group of stocks accounted for a large share of the gains.
The Magnificent Seven Group of Large Technology Companies – Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG)(GOOGL), Meta (META), Tesla (TSLA) –Previous Year After rising more than 75% in 2024, it rose 63% in 2024. There have been bumps along the way, including the group’s worst day ever in July, but for the most part, the artificial intelligence (AI) boom has kept these tech giants’ stocks buoyed.
So after two years of market domination, what’s next for the Magnificent Seven?
Will the size of Mag 7 become smaller?
Cumulatively, the Wilderness Seven has posted more profits in a single year than the entire stock market of most countries. And even in America, their profits are far superior to other companies.
Without MagSeven, the S&P 500’s total earnings per share would have shrunk instead of increased in 2023. The group’s earnings continued to lead the index in 2024, accounting for about 75% of the S&P 500’s earnings growth.
However, growth is expected to widen in 2025 as the Magnificent Seven slows and other indexes pick up the pace. MagSeven’s share of S&P 500 earnings growth is expected to shrink to just 33% by 2025. This is partly because the group is having a very strong year, making it more difficult to record strong year-on-year growth.
In terms of stock price, Magseven is expected to continue outperforming in 2025, although it will be weaker than its performance over the past two years.
Analysts at Goldman Sachs expect the group as a whole to outperform the “Other 493” (S&P 500 excluding Mag7) by 7 percentage points this year, the narrowest gap in seven years.
What’s next for Nvidia?
Nvidia has been the undisputed leader of the Mag Seven since the group was first named in 2023. As demand for AI accelerators soars, sales and profits soar, driving the stock up 171% in 2024.
Nvidia remains a top choice among Wall Street analysts. None of the analysts tracked by FactSet Research recommend underweighting or selling the stock.
Analysts at Bernstein, Morgan Stanley and Bank of America recently named the stock a top pick for 2025, despite a difficult period of correction near the end of the year. Although there were some problems with development, everyone expressed confidence. Strong demand for Nvidia’s next-generation Blackwell chips will continue to drive exceptional growth this year.
What’s next for Tesla?
Tesla investors could be looking at what could be a watershed year for the electric car maker.
CEO Elon Musk will become President-elect Donald Trump’s top adviser and co-lead an advisory group focused on cutting government spending. Mr. Musk’s relationship with Mr. Trump accounted for all of Tesla’s 63% rise in stock last year (the stock was up just 1% for the year on Election Day), and Mr. Musk’s role in the administration will likely continue. may also affect stock prices.
Musk is known for making big promises, and his comments about 2025 are no exception. In early 2024, he promised to launch a more affordable model in 2025. He expects Tesla to roll out full self-driving software in Texas and California, and has even floated the idea of selling its humanoid robot, Optimus, by the end of the year.
The outlook for Tesla’s core business of manufacturing and selling electric vehicles is uncertain. President Trump is expected to eliminate federal tax credits for electric cars, which will likely put Tesla out of reach for even more consumers. Interest rates could also remain elevated, creating further headwinds to affordability.
Will spending on AI result in revenue from AI?
Throughout 2024, Wall Street questioned the wisdom of Big Tech’s AI infrastructure investments. Cloud providers like Microsoft, Amazon and Alphabet poured tens of billions of dollars into building data centers last year, but at times struggled to convince investors that all their investments would pay off.
As the AI boom enters its third year, analysts expect investors’ focus to shift from building AI capabilities to deploying and monetizing AI products. Analysts at Goldman Sachs refer to this shift to AI monetization as “Phase 3” of the AI evolution. They claim that software and service providers are among the easiest companies to grow at this stage.
JPMorgan analysts also note that all of Big Tech’s spending could start to suffer this year in the form of higher depreciation costs.