Are the Magnificent 7 once again magnificent?
Or at the very least, is it finally safe for wealth managers to start buying the group again? Maybe dip a toe in?
The Roundhill Mag 7 ETF (Ticker: MAGS) has taken a shellacking so far in 2025, falling 17 percent. The good news, however, is that the MAGS ETF has jumped 5 percent in the past week as AI-inspired, mega-cap tech stocks have seemingly regained their market footings. The MAGS ETF offers equal weight exposure to the “Magnificent Seven” stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.
The S&P 500, meanwhile, has only dropped 7 percent so far in 2025 thanks primarily to the other 493 stocks in the index, while rising only 3.5 percent in the past week, underperforming the MAGS ETF.
But does a week’s worth of MAGS outperformance equate to an all-clear signal?
Don’t write off the Magnificent 7 - or the AI trade - just yet, says Todd R. Walsh, CEO at Alpha Cubed Investments. Walsh believes the “innovation train” has not been derailed in the least. In his view, the Magnificent 7 needed to digest their huge gains from the past two years before making the next leg higher.
Walsh also does not see the current volatility in the group affecting their long-term viability. Based on their current valuations, Walsh said he is seeing the most desirable entry points since early 2023, before the AI theme captured the investment public’s imagination.
That said, Walsh is wary of going all-in on one or two members of the Magnificent 7. Instead, he prefers the “basket” approach, favoring lower valuation names like Alphabet (Ticker: GOOG) which sports a 20 P/E over higher priced players like Apple (Ticker: AAPL) trading at 33 times trailing 12 month earnings.
“Either way though, we have high conviction over the long term for this group as a whole because of the massive CAPEX needed to create innovation across the themes referenced above,” Walsh said, adding that that he is omitting Tesla (Ticker: TSLA) from this Magnificent 7 discussion at this time because of its “recent politicization issues and ultra-high valuation.”
For the record, Tesla’s stock jumped 7 percent Wednesday, despite first-quarter results that missed analysts’ estimates for both revenue and earnings. The move higher was generally attributed to the belief that founder Elon Musk would be spending more time running the carmaker instead of attending to his highly politicized Department of Government Efficiency (DOGE) position at Washington.
As for Google parent Alphabet, the Magnificent 7 member reported first-quarter revenue and profit that exceeded analysts’ expectations Thursday thanks to its search business, sending the stock over 2 percent higher. This increase might be a sign it’s safe to come out of the Magnificent 7 foxhole too.
Elsewhere, Noah Hamman, CEO of AdvisorShares, is not entirely sure the worst is over. In his view, these stocks have traded at significant multiples, so investors are “dealing with uncertainty” in both expected sales and earnings. He adds that the country is also facing the prospect of near-term job losses, though he says this will ideally be “offset by stronger long-term growth driven by new manufacturing jobs and increased export sales.”
In the meantime, though, he recommends investors look elsewhere for value, such as his own AdvisorShares Focused Equity ETF (Ticker: CWS), which focuses on mid-cap value stocks.
Finally, Sean Beznicki, director of investments at VLP Financial Advisors, is still keeping an eye on U.S. market volatility, but feels that, with P/E ratios now looking a bit more reasonable, investors might feel more comfortable stepping back into these names.
“We’ve seen similar things before,” said Beznicki. “In 2022, the big seven dragged down the S&P 500, accounting for 56 percent of the negative performance. But then they bounced back, making strong positive contributions in both 2023 and 2024.”
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