The Magnificent Seven tech stocks look cheap compared to other stocks within the S&P 500, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The analysis from Nigel Green of deVere Group comes as the Wall Street index rose about 1.2% to close at a new record high on Tuesday.
It follows the tech-dominated Nasdaq Composite, Japan’s Nikkei 225, Germany’s Dax and France’s Cac 40, among other indices, all having hit their highest-ever levels in recent weeks.
The deVere CEO says: “These tech stocks look cheap relative to other stocks in the market due to a combination of factors including their exceptional financial performance, transformative tech innovations, competitive advantages, and attractive valuation metrics.”
He continues: “In 2023, the Magnificent Seven collectively achieved a staggering net income growth of 27%, a stark contrast to the net income loss of 4% experienced by the rest of the S&P 500.
“This impressive feat underscores their ability to thrive and expand their market dominance. Such consistent and robust financial performance is testament to their enduring relevance and innovative capacity.”
A key factor contributing to the undervaluation of the Magnificent Seven lies in their early investments in artificial intelligence (AI).
Companies like Microsoft and Meta were visionary in recognising the potential of AI and made significant investments accordingly.
“These investments are bearing fruit, fuelling further growth and cementing their positions as leaders in tech,” says Nigel Green.
“Meta, for instance, has seen its stock surge by a remarkable 44% this year, propelled by its AI-driven initiatives and innovative strategies.
Microsoft, on the other hand, has not only surpassed Apple as the most valuable company in the world but has also witnessed an 8% increase in its stock value, proving the enduring relevance of its AI-driven ecosystem.”
He goes on to say: “The pivotal role played by chipmaker Nvidia in powering the AI revolution cannot be overstated.
“With its cutting-edge tech and innovative solutions, Nvidia is now driving technological advancements across various sectors.
“This year alone, the stock of Nvidia has soared by an astounding 87%, a reflection of its unparalleled growth trajectory and unwavering investor confidence.”
Despite the stellar performance of the Magnificent Seven, certain outliers like Tesla and Apple have witnessed declines in their stock value in 2024, down 28% and 12%, respectively.
However, it’s crucial to recognise these setbacks within the broader context of their long-term growth trajectory and market dominance.
“Tesla’s pioneering electric vehicles and renewable energy, coupled with Apple’s innovative product line-up and strong brand loyalty, position them strongly.
“The temporary fluctuations in their stock value should not overshadow their intrinsic value and potential for future growth.”
The deVere CEO concludes: “The Magnificent Seven tech stocks in the S&P 500 are more than just investments; they’re gateways to the future.
“With their stellar financial performance, early investments in AI, and unwavering commitment to innovation, these stocks are likely to be set for a continued bullish run.”
