Citi strategists declared the era of the 'Magnificent 7' large-cap technology stocks over in a recent client note on 20일 (local time), stating the concept has lost its vitality as a framework for evaluating large-cap growth stocks. The assessment comes as the Magnificent 7 group has underperformed the broader market this year, with the Roundhill Magnificent 7 ETF rising only 1% compared to the S&P 500's 9% gain. The shift reflects growing concerns about valuations, capital expenditure levels, and uncertain prospects for the software sector amid AI tool proliferation.
Magnificent 7 Underperforms Broader Market This Year
Citi noted that while the Magnificent 7 dominated markets following the artificial intelligence boom that began in late 2022, recent performance has deteriorated significantly. The Roundhill Magnificent 7 ETF gained just 1% this year, lagging the S&P 500 index which rose 9% over the same period. According to Business Insider reporting on 20일 (local time), Citi strategists wrote in their client note that "the Magnificent 7 lost its vitality as a concept for evaluating large-cap growth stock trends long ago."
Microsoft Records Worst Performance Among Magnificent 7
Citi explained that some stocks within the Magnificent 7 face particularly harsh evaluations. Valuation concerns, capital expenditure worries, and uncertain outlooks for the software industry amid AI tool proliferation contribute to the divergence. Microsoft recorded the worst performance among the Magnificent 7 this year, declining 17%. The strategists identified recent additional weakness as triggered by concerns over massive AI capital expenditure commitments.
Top 25 S&P 500 Contributors Outpace Magnificent 7 Returns
Citi highlighted that companies outside the Magnificent 7 played a substantial role in driving S&P 500 gains this year. The firm estimated that investing in an index weighted by the top 25 stocks contributing most to S&P 500 returns this year would have generated approximately 7% returns since the beginning of the year. This figure exceeds the Magnificent 7's 2% gain. Strategists noted that "even expanding to a Magnificent 10 would miss important companies with solid performance such as Intel, Applied Materials, and Lam Research."
FAQ
What did Citi strategists say about the Magnificent 7 stocks?
Citi strategists stated in a recent client note on 20일 (local time) that the Magnificent 7 has lost its vitality as a concept for evaluating large-cap growth stock trends. They declared the era of these seven large-cap technology stocks over, citing underperformance relative to the broader S&P 500 index.
How did the Magnificent 7 perform compared to the S&P 500 this year?
The Roundhill Magnificent 7 ETF rose only 1% this year, significantly underperforming the S&P 500 index which gained 9% over the same period. Among individual stocks, Microsoft recorded the worst performance with a 17% decline this year, while an index of the top 25 S&P 500 contributors would have returned approximately 7%.
