Source: Barron's Chinese; Author: Alan Sloan.
Don't take the name 'Seven Titans' too seriously.
The seven American tech giants and their eight stocks (Alphabet's A and C shares) have drawn all the attention, which is an interesting side of the recent US stock market.
The term "magnificent seven" comes from the classic western action movie "The Magnificent Seven" starring Yul Brynner and Steve McQueen in 1960. Michael Hartnett, chief investment strategist at BofA Securities and a fan of the film, used the term when discussing tech companies in a May 2023 report, and it caught on from there.
In 2023, the performance of the "magnificent seven" was indeed "magnificent", with each of the stocks in the group being a "lead character" in the market. However, so far this year, apart from Nvidia, the performance of the other six stocks has either been average or extremely poor. But the term "magnificent seven" is still in use, and Roundhill Investments has even issued an ETF related to the "magnificent seven" - Roundhill Magnificent Seven (MAGS).$NVIDIA (NVDA.US)$From the perspective of market reality, the term "magnificent seven" is outdated and should be eliminated. Below, I will explain this point of view through data.
Last year, Nvidia was the most "magnificent" performer of the "magnificent seven", with a total return of 239%. The returns of the other six stocks - Apple, Amazon, Facebook, Google (now Alphabet), Microsoft and Tesla - ranged from 49% to 194%.
Due to the fact that market capitalization is used to calculate (unlike the price-weighted Dow Jones Industrial Average), as seen in the table below, although Nvidia performed better than the other stocks in the "magnificent seven", its influence on the S&P 500 index is after Microsoft and Apple.$Amazon (AMZN.US)$According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, last year's amazing performance means that the "magnificent seven" accounted for 62.2% of the S&P 500 index's return of 26.3%. $Apple (AAPL.US)$, $Microsoft (MSFT.US)$, $Meta Platforms (META.US)$And$Tesla (TSLA.US)$Silverblatt said that if the "magnificent seven" were excluded, the return of the other 493 stocks in the S&P 500 index last year was 9.94%.
The "magnificent seven" performed well in 2023. $S&P 500 Index (.SPX.US)$Last year, each stock in the tech "magnificent seven" performed strongly.
Black: Total Return. Blue: Contribution to S&P 500 Total Return. Source: S&P Dow Jones Indices.
Source: S&P Dow Jones Indices.
In 2024, there is actually only one "giant".
The performance of every stock in the tech "magnificent seven" was very strong last year.
Black: Total Return.
Blue: Contribution to S&P 500 Total Return.
NVIDIA has been dominant this year.
Black: Total return Blue: Contribution to total return of S&P 500 index Note: Data as of May 31, 2024. Source: S&P Dow Jones Indices Note: Data as of May 31, 2024. Source: S&P Dow Jones Indices
However, this year, with Tesla's stock price plummeting (as of May 31, the company's stock price had fallen by 28.3%, compared to last year's increase of 101.7%), the term "Seven Giants" seems to have become meaningless, or at least that's what I think.
However, a very strange phenomenon will be discovered after careful analysis of these figures.
Like many things that have passed their prime on Wall Street, the "Seven Giants" is still on people's lips.
According to Silverblatt, as of May 31, NVIDIA's contribution to the total return rate of the S&P 500 index was 32.26%, exceeding the total contribution of the other six stocks by 21.01%. Even if Tesla's drag on the S&P 500 index is ignored, NVIDIA's contribution still exceeds the total contribution of the other six stocks by 25.64%.
NVIDIA's dominance is shocking. Its contribution to the total return rate of the S&P 500 index is 4.6 times that of the second-largest contributor, Microsoft. In addition, except for NVIDIA and Microsoft, the return rates of the other five stocks are lower than the total return rate of the other 493 stocks in the S&P 500 index, which is 6.01%.
I don't expect this article to change people's views, given the frequent use of the term "Seven Giants" in discussions and reports on the US stock market. However, I think investors should look at what is really happening in the stock market, rather than allowing a term casually mentioned by Bank of America Securities' Hartnett to take on a life of its own.
Articles and analyses about NVIDIA's stock performance and prospects abound, so I won't repeat them here. In addition, what I want to say is that I know I don't know where NVIDIA is headed--even though I really wish I did.
But what I do know is that in the movie "The Magnificent Seven," the seven gunmen hired by a Mexican village suffered heavy casualties, but they saved the villagers' food and supplies from falling into the hands of the bad guys.
Apple's performance this month has been excellent. Will this upward trend continue? No one knows.
Given the frequent use of the term "Seven Giants" in discussions and reports on the US stock market, I don't expect this article to change people's views, but I think investors should look at what is really happening in the stock market, rather than allowing a term casually mentioned by Bank of America Securities' Hartnett to take on a life of its own.
Articles and analyses about NVIDIA's stock performance and prospects abound, so I won't repeat them here. In addition, what I want to say is that I know I don't know where NVIDIA is headed--even though I really wish I did.
But what I do know is that in the movie "The Magnificent Seven," the seven gunmen hired by a Mexican village suffered heavy casualties, but they saved the villagers' food and supplies from falling into the hands of the bad guys.
Will the "Seven Giants" help investors like the seven gunslingers who helped the villagers in the movie "The Magnificent Seven"? No one knows the answer to this question, but I am sure that observing this process will be very interesting, as long as we don't take this name too seriously.
Editor/Lambor