If you’ve watched any financial news in the past year, you probably heard the term Magnificent 7. Much like FAANG and MAMAA, Magnificent 7 is a name used to describe a group of stocks that share similar characteristics. Another thing that all these terms have in common is that they can make it more difficult to understand financial media if you aren’t familiar with the latest lingo.
At DreamWork Financial Group, we strive to make investing accessible for everyone – not just those who constantly follow market news. That’s why we define terms like Magnificent 7 so you can get the most value from financial media and be more confident in your investments.
What are the Magnificent 7 and how did they get their name?
The Magnificent 7 stocks are some of the largest, most valuable companies in the world. They also share a similar focus on up-and-coming technologies like AI, cloud computing, and graphics.
The term Magnificent 7 comes from a 1960s Western movie about a small group of gunslingers who miraculously defend a town from a group of bandits. An analyst repurposed the name in 2023 to describe a group of 7 companies that have a similarly outsized impact on stock markets. So, who are these magnificent companies?
An Overview of the Magnificent 7 Stocks
The stocks that make up the Magnificent 7 should be familiar to you. They are all household names that make products or provide services that you are likely to see daily.
Apple Inc. (NASDAQ: AAPL)
With a market capitalization of over $3.4 trillion1, Apple earned its place in the Magnificent 7 by dominating the consumer electronics market. It is best known for hardware including the iPhone, iPad, and Mac as well as associated software and services like iOS, iCloud, and Apple Music.
Amazon Inc. (NASDAQ: AMZN)
Another consumer-focused member of the Magnificent 7 is Amazon. This multinational technology company offers a plethora of products and services in the consumer discretionary sector including e-commerce, online advertising, digital streaming, cloud computing, and artificial intelligence. With a market cap exceeding $1.8 trillion1, Amazon is one of the largest companies in the world.
Alphabet, Inc. (NASDAQ: GOOG)
Google parent company Alphabet has a market cap of nearly $2 trillion1 and a reputation as the leading online search platform. In addition to its core business, the company offers many products and services like advertising, software applications, mobile phone services, operating systems, AI, smart home and other hardware products within the communication services sector.
Meta Platforms Inc. (NASDAQ: META)
Meta Platforms is the parent company of Facebook, Instagram, WhatsApp, and Threads among other services. Through these applications, the company is also heavily involved in advertising and, more recently, virtual reality. Meta makes the list of the Magnificent 7 due to its massive market share and over $1.3 trillion1 market cap.
Microsoft Corporation (NASDAQ: MSFT)
Though older than many of the companies on this list, Microsoft has evolved with the times. The company makes software – like the famous Microsoft Office suite – as well as operating systems, cloud computing technology, and AI applications. Microsoft’s consistently progressive technology and whopping $3.1 trillion1 market cap helped the company earn its place in the Magnificent 7.
NVIDIA Corporation (NASDAQ: NVDA)
Unlike some of the other names on this list, you may not know that you use NVIDIA products in your daily life. The company has a $3 trillion1 market cap earned by making a diverse array of technological products. Their graphics processing units, application programming interfaces, and system-on-a-chip units for mobile computing are considered best-in-class for some applications. The company is also a dominant player in AI and cryptocurrency mining hardware.
Tesla Inc. (NASDAQ: TSLA)
The smallest company in the Magnificent 7 is Tesla – the iconic maker of electric vehicles, solar panels, and power storage batteries. With a market cap of $683 billion1, the company has come a long way in a short time, but still falls short of other members in terms of size.
The Magnificent 7 In Your Portfolio
If you own a mutual fund or ETF that includes stocks, you likely own at least a part of the Magnificent 7. These companies make up a significant portion of the major stock indices and are therefore featured in most large-cap and total stock market index funds and ETFs. Most actively managed funds that invest in large companies also contain at least a few of the Magnificent 7.
However, you don’t have to buy the Magnificent 7 through a mutual fund or ETF. You can also purchase these companies as individual stocks. Over the past several years, individual investments in these stocks have paid off for investors. The chart below shows how substantially the prices of these stocks have grown in the past 5 years. Over that timeframe, NVIDIA has reported the largest gain at 3093% and Amazon has reported the smallest at 92%. For reference, the S&P 500 reported a 92% gain over the same time frame. Therefore, all the Magnificent 7 have either matched or beaten the returns of the S&P 500 over a 5-year timeframe.1