“The Magnificent 7” refers to the seven biggest US technology related stocks1 which, except for Tesla, helped to drive markets to record highs at the end of the 2Q.
This rally was fueled by excitement around the Artificial Intelligence (AI) secular theme, which in turn drove US market concentration to unprecedented levels with the top 10% largest US stocks accounting for around 75% of the US stock market.
But the valuation moves in the Magnificent 7 has not just been about re-rating – their economic profit has grown strongly from $40 billion in 2010 to a forecasted $460 billion in 2024, generating 26% of the total US market economic profit, roughly equivalent to their valuation in the market.
But with momentum and positioning in technology overextended, it didn’t take much for cracks to start to emerge by quarter end. We took advantage of the strong momentum in technology stocks over the quarter by taking some profit across several of our technology holdings including two of the Mag 7, Nvidia and Microsoft, as well as global leading semiconductor foundry, TSMC.
Interested in learning more?
Read the full Sustainable Outcomes Global Equity update for information on the US Inflation Reduction Act, a deep dive into ‘our ageing world’, and new positions for the SOGE strategy.