The U.S. tech market has been one for the ages, a dazzling streak of success that has captivated investors far and wide. Examining the landscape, sector expert Peter Callahan from the hallowed halls of Goldman Sachs Global Banking & Markets assures us that this is no transient fancy, but a rock-solid phenomenon rooted in the bedrock of lasting, enduring principles.
The S&P 500 Index has leaped over 25% in the past year, emblematic of the market’s buoyant mood.
This trend is mirrored in the performance of exchange-traded funds (ETFs) tied to the Index — the SPDR S&P 500 ETF SPY, the Vanguard S&P 500 ETF VOO, and the iShares Core S&P 500 ETF IVV.
At the forefront guiding this remarkable surge are the Magnificent Seven in the tech realm. These elites have been instrumental in propelling the S&P 500’s recent soar to new heights.
The graph above reveals the stellar performance of the Magnificent Seven tech titans over the past year. Leading the charge is Nvidia Corp NVDA, trailed by Meta Platforms Inc META, and Amazon.com Inc AMZN close behind. These heavyweights have delivered returns of 234.86%, 164.89%, and 86.70%, respectively, as per data from Benzinga Pro.
Microsoft Corp MSFT, Alphabet Inc GOOG GOOGL, Apple Inc AAPL and Tesla Inc TSLA round off this prestigious cohort. They have clocked gains of 61.84%, 48.09%, 19.17%, and 1.85% on the charts, respectively, by Feb. 26, 2024.
Also Read: Analyst Who Coined ‘Magnificent 7’ Label Declares End Of An Era: ‘I Don’t See These Seven Names Rising Together’
The Tech Rally Mystery Unveiled by Callahan
Since the dawn of 2023, these septet stocks have outpaced peers, marking a striking 90% surge.
In stark contrast, the remaining 493 stocks in the S&P 500 index have notched a more modest 18% rise. All fears of frothiness or echoes of the dotcom bubble notwithstanding, Callahan sees a divergent script. He attributes the triumph of the Magnificent Seven to their laser focus on generative AI.
Beneath the Buzz
While investor frenzy has indeed surged in the tech sphere due to the ascent of AI, Callahan is quick to remind us that this is no mere hype. Instead, tangible revenue and earnings growth lie at the core of this feverish enthusiasm, as affirmed by a mammoth 15% year-over-year revenue surge reported by the Magnificent Seven in the last quarter.
Looking ahead, there is a rosy projection of 12% annual sales growth spanning till 2026, pointing to a steadfast and promising trajectory. Callahan posits, “This rally has been constructed on a solid bedrock,” exuding optimism in the continued prosperity of these tech juggernauts powered by the transformative force of generative AI.
As investors navigate the tech terrain, the Magnificent Seven’s commitment to sustainable expansion and state-of-the-art technologies like generative AI cements their position as linchpins in the ongoing tech crusade.
Far from the specter of a bubble, the foundational forces steering this tech upswing paint a picture of resilience and potential for the Magnificent Seven and, by extension, the broader tech milieu.
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