Will The Magnificent 7 Eclipse China’s Economy In 2024? Here’s What To Look For – Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN)

A small number of technology companies, affectionately named the “Magnificent 7,” have accounted for an outsized portion of the SPDR S&P 500 ETF Trust SPY gains in 2024. Will it continue through the rest of the year?

The Magnificent 7: The Magnificent 7 comprises seven mega-cap companies:

• Microsoft Corp MSFT, up 26.15% in 2024.
• Apple Inc AAPL, up 21.37% in 2024.
• NVIDIA Corp NVDA, up 164.38% in 2024.
• Alphabet Inc GOOG GOOGL, up 37.88% in 2024.
• Amazon.com Inc AMZN, up 33.38% in 2024.
• Meta Platforms Inc META, up 54.24% in 2024.
• Tesla Inc TSLA, down 0.72% in 2024 (but up over 40% in the past month).

The equal-weighted Roundhill Magnificent Seven ETF MAGS is up nearly 50% in the first six months of 2024. The seven stocks now account for more than one-third of the S&P 500.

The seven stocks are closing in on the size of the Chinese economy. The total market capitalization for the Magnificent 7 is over $16.6 trillion, while the projected GDP of China in 2024 is $18.5 trillion.

To surpass the Chinese economy, the seven companies must appreciate by 11.38% by year-end, a more than 20% annualized return. Is it possible for Big Tech’s rally to continue enough to push it over the edge? Here’s what to look for.

Artificial Intelligence: Investor optimism in artificial intelligence (AI) has driven a large portion of the Magnificent 7’s share price appreciation. The mega-caps have poured billions into the race to develop AI products.

One analyst from Goldman Sachs called the technology “exceptionally expensive” and cast doubt on whether returns could exceed costs.

AI needs to be a legitimate value-add for customers if it is to turn a profit and drive future stock appreciation.

Future Earnings: Impressive fiscal first-quarter results for NVIDIA drove the stock up 30% since late May.

Future performance will be dependent on whether the companies can meet experts’ lofty expectations in the coming months. If the companies miss on earnings, they will likely be punished by the market, throwing a wrench into the historic rally.

Regulatory Concerns: The Magnificent 7 faces significant regulatory hurdles.

The European Union has moved to regulate AI, a move that could influence other countries. Apple is facing an anti-trust lawsuit from the Federal Trade Commission (FTC). Alphabet has also faced significant pushback from various countries for perceived anti-competitive behavior.

Investors will closely watch the regulation of technology companies in the coming months.

2024 Election: The 2024 election remains a large question mark with four months until election day. The result would likely affect regulatory battles against Big Tech launched by President Joe Biden‘s FTC.

Additionally, the presumptive GOP candidate, former President Donald Trump, is floating the renewal of his trade war with China if he is reelected. Geopolitical tensions between China and the United States would hurt technology companies with exposure abroad.

Disclaimer: Past performance does not indicate future performance and investors should not assume that a stock will perform well simply because it has in the past.

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