NASDAQ shares Apple shares, Microsoft shares & Co.: "Magnificent Seven" contributed almost two thirds to the growth of the S&P 500 in 2023 – is there still diversification?

• “Magnificent Seven” partly with a market value worth trillions
• AI as a growth driver
• Heavy weight in the S&P 500

“Magnificent Seven”: The crème de la crème of the tech industry

According to the 1960 Western film of the same name, the “Magnificent Seven” of the tech industry represent the crème de la crème of US listed companies. The seven top stocks in the industry are: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla.

“Trillion Dollar Club”

Almost all members of this unofficial corporate association are also members of the “Trillion Dollar Club.” NVIDIA, Amazon, Alphabet, Microsoft and Apple already have a market value of over a trillion US dollars. The electric car maker Tesla reached this mark between 2021 and 2022, the company’s market capitalization under the leadership of Elon Musk However, it is now well below one trillion US dollars. And Facebook parent Meta Platforms was also unable to sustainably defend the title it achieved for the first time in summer 2021, but is now making itself comfortable again in the trillion-dollar club, even if only just.

Artificial intelligence as a growth topic

Last year, the seven tech giants were able to benefit primarily from the growth topic of artificial intelligence. Microsoft is at the forefront with its stake in the AI ​​startup OpenAI, which is responsible, among other things, for the development of ChatGPT. The AI ​​tools can now also be found in numerous Office applications from Microsoft. Google’s parent company, Alphabet, is trying to catch up with its own assistant Bard and challenge the Windows developer’s pole position. Amazon is also already using AI applications, both for its mail order business and for its cloud subsidiary Amazon Web Services (AWS). The situation is similar with Meta and its numerous platforms such as Facebook, Instagram and Threads. But NVIDIA is also considered an important player in the AI ​​market with its powerful chips and its own models. AI is already playing an important role at the electric car manufacturer Tesla, with corresponding technologies being used in the Autopilot driving assistance system, for example. Only Apple is keeping a low profile when it comes to AI. As “Techopedia” reported, among others, the iGroup is also likely to be working on some applications that rely on Large Language Models (LLM).

“Magnificent Seven” delivered strong gains on the S&P 500

An evaluation by “MarketWatch” shows how much the AI ​​topic contributed to the growth of the seven tech giants last year. Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla contributed to an increase in the stock market value of the S&P 500 by $5.1 trillion in 2023, while the remaining 493 stocks included in the market-wide index only accounted for an increase of 2 .8 trillion US dollars were responsible. The Magnificent Seven thus accounted for almost two-thirds of the value growth in the index of the 500 largest listed US companies.

S&P 500 corrects itself

Is the S&P 500, which is actually characterized by its cross-industry composition, still sufficiently diversified? Deep Dive columnist Phil Van Doorn answers this question on MarketWatch’s “On Watch” podcast with a resounding no. “The S&P 500 is self-correcting. It rewards success,” Van Doorn told host Jeremy C. Owens. “NVIDIA, which soared last year by essentially dominating a new category of major technology products, is taking up a much larger share of the index than before,” he said. “If this changes over time, NVIDIA’s weighting will decrease and other companies’ weightings will increase, presumably as they take market share from NVIDIA.”

Difficult environment for new competitors

Nevertheless, it is more difficult for new competitors to compete against established companies with high market capitalization, as Owes pointed out. In addition, the high costs that the major market players now have to incur in expanding their AI products are likely to reduce margins in the coming years. This means that valuations on the stock market are likely to fall – or at least the time horizon for expectations is shifted.

Questions about ethical and moral values ​​remain

But according to Owens, moral questions also have to be asked. The majority of the seven tech players have implemented large-scale layoffs in recent months, while at the same time workers are being rationalized away through AI applications. Technical progress is likely to ensure that a similar picture will soon be drawn in other industries, according to the MarketWatch editor. “Are higher profit margins a worthwhile trade-off for a potentially decimated labor market?” Owens concluded. This is a question you have to ask yourself as an investor, but also as a user of the new technologies.

Editorial team finanzen.net

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