Heading into this week, the Magnificent 7 stocks — made up of the largest U.S. companies — have been lagging the overall market.
This is a major shift from the trend that for years saw big tech stocks such as Nvidia (NVDA) lead the stock market higher. The talking heads in the mainstream media have been questioning the bull market because leadership was so concentrated in the mega-cap names.
Now that the tides have changed, only a small portion of the media are talking about it, and analysts still continue to question the bull market.
A Breadth Signal Worth Noting
As a matter of fact, the S&P 500 Equal Weight Index closed at its highest level ever last Friday. This is an extremely bullish signal because it indicates the breakout was not driven by a small group of stocks, but rather the opposite. Market breadth, as they call it on Wall Street, is improving — a positive for stocks in the coming months and years.
The percentage of stocks in the S&P 500 hitting new 52-week highs is at the highest level in a year.
So why am I going to talk about the Magnificent 7 if it appears they might be setting up to lag the “493” in the coming year?
Well, there are still opportunities in the group, and it is not a good idea to ignore the size and strength of these companies.
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Quick View On All Seven Stocks Today…
Amazon (AMZN)
The stock fell to its lowest level since last May after reporting mixed earnings on Friday. Cash flow was weaker due to large investments in property and equipment, and that will not end anytime soon. The stock trades at 27 times 2026 earnings estimates and 2.8 times sales — it is not cheap, but also not expensive at this price.
Alphabet (GOOGL)
The market reacted more positively to Alphabet’s earnings last week, as the stock sits about 4% below its all-time high. A similar story here, with plans to greatly increase capex spending in the future. It also trades with a P/E ratio in the high 20s, but the price-to-sales ratio is 8.5 — much higher than Amazon.
Nvidia (NVDA)
With earnings expected to grow by 64% in fiscal 2027 (current year), the stock trades with a forward P/E ratio of only 24, not far above the market average. Remember, this is the world’s largest company and arguably the most innovative and important. Yet it trades near the market valuation while growing much faster — to me, that is too compelling to ignore.
Microsoft (MSFT)
Recent earnings are not the culprit for the stock trading 25% off its 2025 high — rather, it has been questions surrounding its AI strategy. The software giant remains a leader but has been caught up in the broader software sell-off. At this point, with a P/E ratio of 24 and a rather lofty 9x sales, the stock is a decent buy.
Tesla (TSLA)
The most expensive of the group could also have the biggest upside potential. Over the last two weeks, it has become clear that Elon is taking Tesla in the direction of robotaxis and humanoid robots. Tesla is no longer a traditional car company, and that is why it trades at 199 times 2026 earnings estimates. A big gamble — but potentially an even bigger upside.
Meta Platforms (META)
The stock is trading near the same level it was one year ago. The AI trade has left the stock behind as investors look for alternative opportunities. Now that it has lagged for a year and the P/E ratio is down to 21, the opportunity may be here.
Apple (AAPL)
The former leader and first trillion-dollar company is now the slowest grower of the group. Add in the fact that the stock is not cheap, and I do not get excited about the iPhone maker at current levels.
Overall, I like small- and mid-cap stocks better at current levels, but I would not ignore the mega-caps this year.
Here’s to your future,
Matt McCall
Founder, NXT Wave Research
