Key Takeaways
- The Magnificent Seven gained more than 13% last month, making the group of big tech stocks one of the best-performing corners of financial markets in May.
- The group is still trading in the red for the year, but stocks could get a boost from Apple’s Worldwide Developers Conference and Tesla’s scheduled robotaxi rollout this month.
- After rebounding from their post-“Liberation Day” slump, tech valuations have returned to historically high levels.
The Magnificent Seven had a strong May, but the group remains in the red for 2025. What’s next?
Taken together, the seven big tech stocks—names like Nvidia (NVDA), Tesla (TSLA), Meta Platforms (META) and more—outperformed dozens of other assets tracked by Deutsche Bank analyst Henry Allen last month. The group saw their stocks rise more than 13% in aggregate in May, their biggest monthly gain in 2 years, according to Allen.
Nonetheless, the group remains one of the few corners of global markets lower since the start of the year. Of 32 different sets of investments tracked by Allen—including global equity indexes, government and corporate bonds, foreign exchange indexes, and commodities—only one other asset, crude oil, is negative for the year.
Whether the Mag Seven can climb into positive territory this month could depend on what Wall Street thinks of a few upcoming corporate events.
What Could Lift Some Mag Seven Laggards in June
Apple (AAPL) will host its Worldwide Developers Conference on June 9. The iPhone maker is expected to unveil a software development kit that helps outside developers build features with Apple Intelligence’s underlying large language models. That would effectively let Apple outsource some of the work of building AI products for its devices, which could help close the perceived gap in AI capabilities between it and major peers.
And around the middle of the month, Tesla (TSLA) is expected to roll out its robotaxi service in Austin, Texas, in what could be a major test of the company’s autonomous vehicle ambitions.
Apple and Tesla are the worst-performing stocks in the Mag Seven so far this year, with their shares down about 20% and 16%, respectively. Investor enthusiasm about the companies’ progress in some emerging areas seen as vital could help lift their shares.
BofA Upgrades Tech Sector, Downgrades Comms
Bank of America analysts on Monday upgraded the information technology sector—home to Microsoft (MSFT), Nvidia, and Broadcom (AVGO), the latter a non-Magnificent stock—to neutral from underweight, and downgraded communications services—including Alphabet (GOOG) and Meta—to underweight from neutral. They cited active funds’ historically low exposure to IT and high exposure to communications, as well as the communications and media industry’s comparatively unpredictable revenue streams.
Perceived recession risks have decreased in the last month thanks to easing tensions between the U.S. and China. Lately, though each side has accused the other in recent days of violating the terms of their agreement, demonstrating the fragility of their detente. The Mag Seven’s communications companies, Alphabet and Meta, likely have the most recession-proof ad businesses on the internet thanks to the sheer size of their audiences.
Yet the tech giants face another risk, according to BofA analysts: Tech companies, they say, addressed elevated interest rates in 2023 by effectively “shortening duration”—they cut costs, reduced capital expenditures, and increased their cash returns. Today, Alphabet and Meta are locked in an all-out AI arms race, spending tens of billions of dollars a year on AI infrastructure. That spending could tie the companies’ hands in the event of a slowdown.
Another risk for tech stocks is their price tag, according to BofA. Valuations have declined from their recent highs, but the stocks are still expensive—the Mag Seven’s P/E ratio of 33.1 is well above the S&P 500’s long-term average—and earnings expectations remain elevated.