With their strong performance, the shares of the so-called “Magnificent Seven” have driven the US stock markets upwards in 2023. However, there are signs of a changing of the guard among the top performers in 2024. For which stocks from the previous top group analysts now see less potential and which stocks could be included in the Magnificent Seven group instead.
• Seven Stocks Top Reasons for Broad U.S. Market Gains in 2023
• Some members of the Magnificent Seven will remain unchanged in 2024
• Different opinions on stocks that will be leaving the group
In 2023, the tech companies Apple, Amazon, Alphabet, NVIDIA, Meta Platforms, Microsoft and Tesla caused a stir with strong share price gains – and were nicknamed the “Magnificent Seven” due to their performance. However, the start to 2024 was initially less good for the stocks, with losses occurring in the first trading days of 2024. Even though many members of the illustrious group are now doing better on the stock market, doubts are increasing among market observers as to whether the tech stocks can repeat their strong run in the new year. “CNBC” host Jim Cramer, for example, expects a general sector rotation away from Big Tech. Other experts are not quite as pessimistic about the Magnificent Seven, but believe that at least some members of the group will have to give up their place in favor of other stocks.
That’s what makes the Magnificent Seven
One feature of the Magnificent Seven is that they were the main drivers of the broad US S&P 500 index last year. As “Business Insider” writes, citing data from US investment bank Goldman Sachs, the group was responsible for around three quarters of the S&P 500’s total profits in 2023. This is not only due to their strong performance – NVIDIA shares, for example, rose by around 239 percent in 2023 – but also because all stocks in the broad US index are weighted by market capitalization. Companies with a high stock market value therefore automatically have more influence on the movements of the entire index – and overall, according to “MarketWatch”, the seven stocks accounted for around 30 percent of the total market capitalization of the S&P 500 at the end of 2023.
In 2024, however, it will be other company stocks that will drive the S&P 500 the most. According to “Investor’s Business Daily”, around 47 percent of the predicted value gain of 3.1 trillion US dollars for the index will come from the “new” Magnificent Seven. However, according to experts, the seven most important stocks for index performance in 2024 will no longer just be tech stocks. “Given that it is more likely that market breadth will no longer be as concentrated in 2024, sector allocations will likely increase along with greater return dispersion,” Matthew Bartolini of State Street Global Advisors said, according to Investor’s Business Daily. . However, there are sometimes different views among analysts about which stocks will join the Magnificent Seven this year and which will have to leave the group.
Analyst estimates: These are the new Magnificent Seven for 2024
Using data from S&P Global Market Intelligence and MarketSmith, which in turn is based on aggregated analyst estimates, “Investor’s Business Daily” examined which seven US stocks are likely to account for the largest share of the expected increase in value of the S&P 500 according to their forecast price development in 2024. The business side came to the conclusion that five companies from the Magnificent Seven are likely to perform extremely well again this year. NVIDIA, Amazon, Alphabet, Apple and Microsoft will probably be able to defend their place at the top due to their sheer size and influence. According to EY, they are the five US companies with the highest market capitalization – internationally only Saudi Aramco can keep up with them as the world’s third largest company.
As “Investor’s Business Daily” further writes, the chip manufacturer NVIDIA is likely to contribute the most to the increase in value of the S&P 500 in 2024. Analysts expect the share price of what is probably the biggest beneficiary of the AI hype to rise by 33 percent this year. Given the performance of NVIDIA shares last year and the ongoing demand for AI applications, this forecast is likely to be conservative, but would still increase the company’s market value by around $400 billion, which is around 13 percent of the expected increase in value S&P 500 would correspond. The company is considered a pioneer in the development of AI chips and will initially be able to defend this position – despite increasing competition from AMD, experts agree. For the analysts at TD Cowen, NVIDIA shares are even the “best idea” for 2024.
According to the business portal Microsoft, the second main driver for the US index would be an expected increase of $300 billion in stock market value, which would correspond to 9.8 percent of the forecast profits for the S&P 500. Microsoft is “essentially the torchbearer of the global AI revolution,” Wedbush analysts wrote, according to Investopedia. In addition, Microsoft shares have not yet priced in “the next wave of cloud and AI growth,” which the tech company, which has a billion-dollar stake in ChatGPT developer OpenAI, will experience in 2024.
In addition, according to analyst estimates used by “Investor’s Business Daily”, Amazon’s market value is expected to increase by $247.8 billion in 2024, Alphabet’s by $187.4 billion and Apple’s by $106.5 billion . Applied to the expected total gains of the S&P 500, this would correspond to shares of 8.1 percent, 6.1 percent and 3.5 percent.
Meta Platforms and Tesla, on the other hand, are likely to lose their place among the Magnificent Seven. Instead, according to “Investor’s Business Daily”, Buffett’s holding company Berkshire Hathaway and oil giant ExxonMobil will contribute more to the development of the S&P 500 and thereby join the group. As the portal writes, analysts believe that star investor Warren Buffett’s investment holding will see a price increase of twelve percent in 2024. Berkshire’s market value would therefore increase by $94.9 billion, which in turn would correspond to 3.1 percent of the forecast profits of the broad US index. According to the experts, ExxonMobil is likely to see an even stronger increase this year: a share price increase of 26 percent is expected here. In terms of market value, this would correspond to an increase of 104 billion US dollars or 3.4 percent of the expected profits of the S&P 500.
According to experts, the influence of the two stocks, which according to the calculations of “Investor’s Business Daily” will no longer be among the Magnificent Seven in 2024, will be significantly smaller in comparison. Meta is likely to only contribute $61.1 billion to the increase in the value of the S&P 500, while a price decline of 1.4 percent is predicted for Tesla in 2024 as a whole, which would destroy $2.7 billion in stock market value.
There is some disagreement about which titles will lose their place
Even if there are numerous voices who are of the opinion that the time of the previous Magnificent Seven is now over, there is not a complete agreement everywhere about which shares can no longer be expected to produce large profits. The most undisputed thing seems to be the departure of the electric car manufacturer Tesla from the group. The news sites “Barron’s”, “The Motley Fool” and “InvestorPlace” also argue that the title will be thrown out of the Magnificent Seven. The market environment for the e-car pioneer is becoming increasingly harsh. Most recently, the Chinese competitor BYD was able to take over the group Elon Musk in EV deliveries in the fourth quarter and analysts have significantly cut their profit growth forecasts at Tesla due to the sharp price cuts in 2023, according to “The Motley Fool”. Bernstein’s experts believe that the electric car maker could “disappoint” investors in 2024 as demand is low “due to Tesla’s narrow (and expensive) product family, which is gradually reaching saturation, and ongoing competition in the industry.” be. Shorting the stock could therefore be “the best idea” for the current year, according to the experts.
However, a possible departure of Meta from the illustrious group is more controversial. Instead of the Zuckerberg Group, “Barron’s”, “The Motley Fool” and “InvestorPlace” see Apple’s place at risk. The reason is the weak growth of the group, which has had to report falling sales in the last four consecutive quarters. According to InvestorPlace, Apple’s valuations on the stock market are “excessive for a company whose sales are growing little or not at all,” which is why the iGroup no longer deserves a place among the Magnificent Seven.
Editorial team finanzen.net
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