The Magnificent Seven tech stocks have seen sharply divergent performances this year, according to strategist Ed Yardeni. While the S&P 500 has returned 13.4% year to date, Amazon is up 21% and Tesla is down 25%. Nvidia, Apple, Alphabet, Microsoft and Meta have returned 19%, 16%, 12%, 6% and 0.4% respectively.
As a result, Meta and Tesla have fallen down the list of the world's largest companies, now behind TSMC, Broadcom, SpaceX and Saudi Aramco. Yardeni notes that the Magnificent Seven are up just 4.8% this year, compared with 16% for the remaining 'impressive 493' stocks in the index.
The dull performance may reflect investor concerns about the huge sums these companies are investing in AI. Yardeni argues that any fall-off in investment could lead to renewed outperformance.
He points out that the forward earnings multiple of the S&P 500 Growth index has fallen to 20.2, against 18.3 for the Value index, well below the multiple above 40 seen in 2000. 'Bull markets do not die of old age or of accumulated gains. They usually die when earnings roll over,' he said.
Yardeni describes the current bull market as driven by 'FEMO' – fabulous earnings momentum – rather than the 'FOMO' of the late 1990s. The S&P 500 is up 117% since the bull market began in October 2022, ranking fifth of the eight bull markets since 1969.