They know all too well how Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla have delivered more than half of the S&P 500's gains in recent years, setting a high bar for everyone else to clear. But things change: One minute, Alphabet is behind the curve on AI and then Google's latest Gemini launch sparked a 'Code Red' from ChatGPT's Sam Altman.
The last 24 hours have brought a clear risk-off move, as concerns over lofty tech valuations have hit investor sentiment. Markets compounded these losses in the early hours of Asian trading but have been rallying back in the couple of hours prior to going to print with US futures clawing back towards flat with the Kospi rallying back a couple of percentage points from early -5% plus losses.
Having swiftly recovered from President Trump's 'Liberation Day' in early April, the Magnificent 7 stocks once again embody U.S. hegemonic influence. Composed of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, each serves as a critical layer in cloud computing, e-commerce, semiconductors, mobile OS, digital advertising and social platforms, while Tesla has yet to fulfill its robotaxi and humanoid robotics potential.
One unexpected side effect of the Magnificent 7's race to build massive AI data centers-and source the power needed to run them-is that they are reducing share buybacks to fund them, according to Goldman Sachs. Companies routinely buy back their own shares to incentivize investors for holding them, to reduce the number of shares available (thus boosting earnings per share), and to boost their own stock prices.
