Magnificent 7: The money earned by Magnificent 7 is more than what most countries make. Is this something we should be concerned about?
Key Points
- The American tech giants called the “Magnificent 7” include Tesla, Amazon, Meta, Alphabet, Nvidia Microsoft and Apple
- In a research note on Tuesday, Deutsche Bank analysts highlighted that the combined market capitalization of the Magnificent 7 alone would make it the world’s second-largest stock exchange.
- However, this level of concentration has some analysts concerned about the United States. and has led to concerns being expressed about the associated risks in global stock markets.
According to a new study from Deutsche Bank, the group known as the “Magnificent 7” now holds more financial influence than almost every other large country combined
Magnificent 7: US Tech Giant
Apple’s Tremendous Growth in Profits and Market Capitalization Amazon, Microsoft, Alphabet, nvidia, tesla and goal- outperformed all publicly traded companies in almost all G20 countries, the bank said in a research note on Tuesday. Of the non-U.S. G20 countries, only China and Japan (and Japan, only Japan) reap greater benefits when their listed companies merge.
Deutsche Bank analysts noted that the combined market capitalization of the Magnificent 7 alone would make it the world’s second-largest stock exchange, double that of fourth-place Japan. He said Microsoft and Apple individually have the same market capitalization as all listed companies combined in France, Saudi Arabia and the United Kingdom.
However, this level of concentration has some analysts concerned about the United States. and has led to concerns being expressed about the associated risks in global stock markets.
Jim Reid, who is in charge of studying the world economy at Deutsche Bank, recently said that the US stock market is as heavily focused as it was in the years 2000 and 1929, which were known for their extreme concentration of wealth.
Deutsche studied the paths of 36 companies that have been among the top five most valuable in the S&P 500 since the mid-1960s.
Reed explained that although the biggest companies changed over time due to shifts in investment trends and earnings outlooks, 20 out of the original 36 companies in the top group are still among the top 50 today.
“Of the Mag 7 in the current top 5, Microsoft has been there for 4 months since 1997. Apple has been there since December 2009, Alphabet has been there for two months since August 2012 and Amazon has been there since January 2017. The newest entrant is Nvidia, which has been there since the first half of last year,” he said.
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Tesla remained in the top five most valuable companies for 13 months in 2021/22, but has now fallen to 10th place, and the share price has fallen almost 20% since the beginning of 2024. By contrast, Nvidia shares remain rising, adding almost 47% since the beginning of the year.
“So, at the margins, Mag 7 has some instability around the status of its members, and one could question its overall valuation, but the core of the group has been one of the largest and most successful companies in the US and of the world. since many years”. They’re done,” Reed said.
Can you increase the profit margin?
Despite a weakening global economic outlook in early 2023, stock market returns on Wall Street were impressive but heavily concentrated among the Magnificent Seven, which benefited heavily from the AI hype and expectations of tax cuts. rates.
In a research note last week, money manager Evelyn Partners highlighted that the Magnificent 7 returned an incredible 107% in 2023, significantly outperforming the broader MSCI USA index, giving investors a still healthy but relatively modest 27%.
Daniel Casali, who is the main investment planner at Evelyn Partners, said that there are signs showing that there might be more chances to invest in US stocks this year, not just in the seven biggest companies, because the US economy is strong and can handle challenges.
“Despite rising interest rates, the company’s sales and profits have been resilient. This can be attributed to companies being more disciplined in managing their costs and households achieving higher levels of savings during the pandemic. “Furthermore, the U.S. labor market remains healthy with nearly three million jobs expected through 2023,” Casali said.