The stock market performance of large US technology companies has been stellar in recent years. These stocks, driven by the new AI paradigm, have posted record profits, yet their end markets are consolidating, calling into question the sustainability of their long-term growth profile.

In the stock market world, Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla are known as the “Magnificent Seven” of technology. These companies account for more than 25% of the S&P 500 and more than half of the Nasdaq 100. In addition, five of the seven are part of the exclusive “billion dollar club”, companies with a market capitalisation above $1 trillion, with Nvidia being the most recent entry.

• Alphabet: Google’s parent company’s profits increased by 23% in 2023, with a capitalisation of $1.6 trillion and a cumulative increase of 141% over the past five years.
• Amazon: The e-commerce platform founded in 1994 by Jeff Bezos has a market capitalisation of almost $1.8 trillion and its shares have appreciated by more than 2000% in the last ten years, 200% per year on average.
• Apple: Last year, Apple surpassed $3 trillion in market capitalisation for only the second time in its history and has seen a 250% increase in its stock market performance over the past five years.
• Meta: The company that owns Facebook, Instagram and WhatsApp started 2024 by setting a record, increasing its value by $204.5 billion in one day. It closed 2023 with revenues of $134.902 billion and currently has a capitalisation of $1.3 trillion.
• Microsoft: Last Wednesday, the capitalisation of the corporation founded by Bill Gates and Paul Allen reached the $3 trillion mark for the first time. Microsoft shares have appreciated by 66% in the last twelve months.
• Nvidia: As the leading supplier of chips specifically designed to train and run AI applications, this company’s stock market performance has been spectacular. Nvidia shares are up 243% in the last 12 months and 60% since the beginning of the year.
• Tesla: Elon Musk’s company revolutionised the electric vehicle industry and has significant competitive advantages thanks to its manufacturing processes and software development using artificial intelligence. Although it has started 2024 by losing about a quarter of its market capitalisation, it has seen an 829% increase in market performance over the past five years.

These tech giants not only stand out in terms of market capitalisation, but are leaders in new technologies such as artificial intelligence, cloud computing, and next-generation software development. A common differentiator among these companies is their ability to collect vast amounts of customer data and harness the power of AI.

Will the returns continue to be magnificent?

When analysing the future of the magnificent seven it should be noted that while there are certain similarities in the services provided between Alphabet, Amazon and Microsoft – whether we are talking about AI chatbots, software-to-cloud services or advertising – there are also huge differences between them. These differences are even more evident if we refer to Meta, focused on social networks, Tesla, in electric vehicles, or Apple, regarding smartphones.

It is therefore a heterogeneous group that is united by the common denominator of a solid business approach and growing areas. That said, some market analysts believe that the spectacular stock market performances of the Magnificent Seven are numbered. In a note entitled “R.I.P. the era of the Magnificent Seven”, Mike O’Rourke, senior market strategist at Jones Trading, argues that the group’s dominance of the stock market is coming to an end.

Whether we look at the stagnating demand for smartphones and slowing sales of electric cars, or the diversification of AI technologies, their markets are maturing and consolidating. Add in the problems of the Chinese economy, economic sanctions due to geopolitical interests and increased competition, and O’Rourke notes that the Magnificent Seven will continue to be very influential in the market, but that “they will start to cancel each other out in terms of performance, rather than all moving in the same direction”.

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