It\u2019s time to question the soundness of continued zealous investment in the Magnificent Seven, one top economist warns.\u00a0<\/p>\n
The S&P 500 has become \u201cextremely concentrated,\u201d with the top 10 stocks contributing 54% of the market returns since January 2021, Apollo chief economist Torsten Sl\u00f8k said in a Friday blog post<\/a>. With the cluster of tech stocks at the top beginning to unravel, he is pouring cold water on continued aggressive investment in the index and in the Magnificent Seven.<\/p>\n \u201cThe textbook idea that the S&P 500 gives you a diversified exposure to risk is just simply no longer the case,\u201d Sl\u00f8k told Fortune. \u201cYou are very focused and concentrated in a small group of names, in particular in tech, making up such a significant share of your overall risk exposure.\u201d<\/p>\n The top 10 companies in the S&P 500 now prop up 40% of the index\u2019s market capitalization<\/a>\u2014more than 30% of which is from the Mag Seven\u2014meaning the fortune of the markets has become increasingly reliant on investors\u2019 optimism in AI. Alphabet\u2019s AI rally not only helped mint CEO Sundar Pichai as a billionaire<\/a>, for example, but the Google parent\u2019s earnings beat<\/a> gave the S&P 500 its fourth consecutive record close on Thursday.<\/p>\n But as the AI bubble swells larger<\/a> than that of the IT bubble a quarter century ago, as Sl\u00f8k has previously noted, the extreme hype around the technology risks creating even broader economic consequences than the dot-com crisis. To protect one\u2019s individual investments, now is the time to reconsider pouring money into the Mag Seven, Sl\u00f8k argued.<\/p>\n \u201cOne should have some exposure to the S&P 500 and should certainly also have some exposure to AI,\u201d Sl\u00f8k said. \u201cBut it\u2019s very clear that [due to] the market\u2019s extreme focus and concentration on this story, this is the time to have a conversation around, What are the things I should be doing with my money?\u201d<\/p>\n The Magnificent Seven becomes Six, becomes Five<\/strong><\/p>\n Mounting concerns about the ramifications of a growing AI bubble coincide with the unraveling of the Magnificent Seven stocks.<\/p>\n \u201cWe\u2019re beginning to have conversations about the \u2018Magnificent Six\u2019, maybe it\u2019s only five,\u201d Sl\u00f8k said. \u201cThis is also just telling you that the Magnificent Seven are seven very, very different companies that have very different businesses.\u201d<\/p>\n Popularized in 2023 by Bank of America<\/a> analyst Michael Hartnett, the \u201cMagnificent Seven\u201d was meant to bunch together a group of companies alike in their goal<\/a> of pushing toward an AI future, but the tech firms once in lockstep are beginning to diverge in their levels of success and areas of investment.\u00a0<\/p>\n Apple<\/a>, for example, has lagged behind competitors<\/a> like Microsoft<\/a> and Meta<\/a> in developing AI products and services. With its stock down about 12% year-to-date, some market watchers have called for CEO Tim Cook to step down<\/a> from the company, despite Cook boosting the company\u2019s stock price by nearly 1,500% over the past decade-plus.\u00a0<\/p>\n Tesla<\/a> has likewise failed to deliver on promises to autonomous driving, continuing this week its streak of sales misses<\/a> and disappointing quarters. Tesla\u2019s stock has fallen nearly 15% in 2025 as investors\u2019 confidence in CEO Elon Musk continues to be tested.<\/p>\n Meanwhile, Nvidia<\/a> this month became the first publicly traded company with a more than $4 trillion valuation<\/a> as its stock price surged by approximately 1,460% over the past five years. The company expected to continue strong sales growth, despite increasing competitive pressures.<\/p>\n Ahead of next week\u2019s earnings reports for Meta, Apple, and Microsoft, analysts are continuing to scrutinize the pricing of these companies\u2019 stocks, assessing if there are other options in the tech sector worth buying into.<\/p>\n \u201cAI will continue to have a dramatic impact on all our lives,\u201d Sl\u00f8k wrote in his blog post. \u201cBut the question remains whether the Magnificent Seven are correctly priced, and if they will even be the best AI investments over the next five to ten years.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"It\u2019s time to question the soundness of continued zealous investment in the Magnificent Seven, one top economist warns.\u00a0…\n","protected":false},"author":3,"featured_media":92052,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[691,738,60974,60975,60976,18318,158,67,132,68],"class_list":{"0":"post-92051","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-magnificent-7","11":"tag-standard-poors-sp","12":"tag-tech-bubble","13":"tag-tech-stocks","14":"tag-technology","15":"tag-united-states","16":"tag-unitedstates","17":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114915296197411115","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/92051","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=92051"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/92051\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/92052"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=92051"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=92051"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=92051"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}