Volatility in the tech sector has seen share price falls for six of the Magnificent 7 stocks since the start of the year, wiping a total $1.57tn (£1.21tn) off the group's valuation, according to data provided by investment platform AJ Bell (AJB.L).
Chipmaker Nvidia (NVDA) saw the biggest decline of the group, having lost $539.13bn off its valuation year-to-date.
Tesla (TSLA), Amazon (AMZN), Microsoft (MSFT), Apple (AAPL) and Alphabet (GOOG, GOOGL) have also seen their valuations fall since the beginning of the year.
Social media Meta (META) is the only Mag 7 stock to have seen its valuation rise this year, up $93.72bn.
Dan Coatsworth, investment analyst at AJ Bell (AJB.L), said that the group as a whole had seen an "astonishing" $1.57tn drop in value, though Meta (META) had "become the Lone Ranger, representing a significant turning point for the tech collective."
"Other labels slapped on popular stocks including "Faangs" and "Mamaa" were quickly confined to the history books — is the Magnificent Seven now joining them?"
The "Faang" group of stocks was comprised of Facebook (META), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOG, GOOGL), which later changed to "Mamaa" – Meta (META), Amazon (AMZN), Microsoft (MSFT), Apple (AAPL) and Alphabet (GOOG, GOOGL) — before becoming the Magnificent 7.
The Mag 7 had thrived over the past couple of years, with the buzz around their roles in the global push in artificial intelligence (AI) technology helping drive shares higher.
For example, Nvidia (NVDA) saw its shares soar 239% in 2023 and 171% last year, as its chips are considered a key enabler of AI.
"Microsoft (MSFT), Alphabet (GOOG, GOOGL) and Amazon (AMZN) were all about growth in cloud computing and Meta (META) was driven by successful use of AI to improve user engagement on its social media platforms," said Coatsworth.
"On a bigger level, AI drove a resurgence in investor appetite for all things tech-related and that has also contributed to the Magnificent 7’s ascent," he added.
"Apple (AAPL) shares moved up as it continued to shift more electronic goods while Tesla (TSLA) motored higher as Elon Musk became best buddies with Donald Trump, with investors hoping that would open more doors for the electric vehicle business."
So what has changed for this group of tech giants this year?
Nvidia CEO Jensen Huang. ·NurPhoto via Getty Images
Why have Mag 7 stocks gone into reverse?
"Tech stocks rallied when Donald Trump won the 2024 US presidential election on hopes of less stringent regulation," said Coatsworth. "The euphoria around his return to the White House has now fizzled away, with all the S&P 500’s (^GSPC) gains wiped out. That’s dampened investor sentiment in general."
Concerns around the potential negative consequences of Trump's policies are starting to show, with fears of a US recession and the far-reaching consequences of an escalating trade war, according to Coatsworth.
"We’ve seen a rotation into other areas such as cheap(er) stocks in the UK and Europe, and more defensive areas in the US like healthcare are getting their moment in the sun," he said. "Even China is attracting more attention as investors keep their fingers crossed for more government stimulus measures to prop up the economy."
"Investors have been sitting uncomfortably when it comes to the US and that’s made them look closer at their portfolios to consider if changes are needed.
"It’s natural to look at the areas that have previously done well and consider if it is time to lock in gains."
In addition, he said that the "hype cycle" around AI and US Big Tech was also at play. "When something is hyped up, a rising tide will lift all boats, and that’s exactly what we saw with anything related to AI in 2023 and 2024," he said.
"The tide is now going out and investors are paying more attention to what might go wrong and whether recent capital expenditure by tech companies has been worth it."
Nvidia delivered revenue of $39.3bn, beating estimates of £38.2bn. Earnings per share of $0.89 were also ahead of forecasts of $0.84. In addition, the company said it expected to generate revenue of $43bn for the first quarter, better than the $42.3bn expected. However, Nvidia guided to gross profit margins of 70.6% to 71% in the first quarter, which would be down on the 73% it reported in the fourth quarter.
Having failed to match investors' lofty expectations around its results, Nvidia (NVDA) stock fell, pulling its market valuation below the $3tn point.
Shares in electric vehicle (EV) maker Tesla (TSLA) have slumped recently, as as data has shown a recent fall in sales in Europe, amid backlash against CEO Elon Musk.
Musk, a key adviser to Trump, has made several high-profile interventions in European politics, including backing the far-right AfD party in the recent federal elections in Germany. In the US, demonstrators have been gathering outside Tesla showrooms to protest against Musk's advocacy for making spending cuts to government agencies, in his role leading the new Department of Government Efficiency (DOGE).
In terms of company performance, Tesla's latest results disappointed against expectations. Tesla posted revenue of $25.7bn for the fourth quarter, which was well below the $27.2bn expected by analysts, as well as being up just 2% on the same period in the previous year. Adjusted earnings per share of $0.73, also came in below expectations of $0.75.
For the full-year, Tesla generated revenue of $97.7bn, which was up just 1% on 2023.
IPhone-maker Apple (AAPL) also had a mixed update for investors when it reported its first quarter results, despite CEO Tim Cook describing it as the company's "best quarter ever".
Revenue of $124.3bn was slightly ahead of the $124.1bn expected, while earnings per share of $2.40 beat estimates of $2.35.
However, iPhone sales of $69.14bn disappointed against expectations of $71.04bn, though Mac sales of $8.99bn beats forecasts of $7.94bn.
Coatsworth said: "Apple (AAPL) seems to be going through the motions and is fixated with constant upgrades to its core products rather than being a trendsetter in the world of consumer electronics.
"The company is playing it safe and not pushing boundaries with technological innovation. Investors need something new to rekindle excitement in Apple’s (AAPL) shares, otherwise the stock could drift sideways."
While Amazon's fourth quarter results beat estimates on the top and bottom line, its guidance for the first quarter disappointed against expectations.
Amazon (AMZN) posted fourth quarter revenue of $187.7bn, besting expectations of $187.3bn, and earnings per share of $1.86 also beat estimates of $1.50.
However, the closely-watched revenue for its Amazon Web Services cloud business came in at $28.7bn, which was just short of expectations of $28.8bn.
For the first quarter, Amazon (AMZN) said it expected to generate revenue of between $151bn and $155bn, which was below analyst estimates of $158bn.
In contrast to the rest of the Mag 7, shares in Mark Zuckerberg's Meta (META) are trading in the green so far this year, up nearly 4%.
Coatsworth said that proof that in investment in AI is having a positive impact on earnings is one tailwind driving Meta's share price.
In its fourth quarter earnings, released at the end of January, Meta posted revenue of $48.4bn, which beat expectations of $46.9bn. Earnings per share of $8.02 also came in ahead of estimates of $6.75.
For the year, Meta (META) reported net income of $62.4bn, which is up 59% on the $39.1bn it reported last year.
"Meta has certainly spent its fair share of dollars — billions of them — yet payback is clear to see in its results, said Coatsworth. "AI has enabled Meta to serve up more relevant content to its social media users on Facebook and Instagram. The more content consumed, the more advertising these people see — and that’s a financial win for Meta."
"Meta says its AI is already being used by over 700 million consumers and it is now bringing the same technology to businesses," he added. "Companies are using its social media platforms to target customers and AI can help to deepen relationships."
Coatsworth said that another tailwind for Meta (META) was the prospect of its biggest rival in the US, TikTok, potentially being removed from the market.
As for whether its time to say goodbye to the Magnificent 7 name, Coatsworth pointed out that history shows "these labels come and go".
"Even though people have happily lumped the Magnificent 7 group of companies together, there are distinct differences between what they do, and they don’t always move in unison on the stock market," he said.
"While these businesses aren’t at risk of disappearing, their collective name is going out of fashion. It will no doubt be replaced by something else soon — whether that’s a new variation or, perhaps more likely, a new group of companies catching the market’s eye."
