Investors look beyond Nvidia and the magnificent seven

Who needs the magnificent seven?
For much of 2024, much-anguished commentary has been on how markets depended on a few high-flying mega-cap technology companies, particularly artificial intelligence (AI) giant Nvidia. Things look very different today.
The MSCI World index and the S&P 500 have been hitting all-time highs, with the US index up over 20 per cent in 2024 — its strongest year-to-date advance this century.
In contrast, only one of the magnificent seven stocks — Facebook parent Meta — has hit new highs. Most of the other tech giants peaked in July, with Nvidia (-15 per cent), Google-owner Alphabet (-13 per cent), Microsoft (-11 per cent), Amazon (-8 per cent), and Apple (-5 per cent) all well shy of previous highs.
There are a few takeaways.
First, AI hype has “likely peaked”, says Barclays, which notes the recent tech pullback came in the face of positive earnings momentum. Consequently, big tech valuations are “no longer extreme”.
Second, 2024′s equity rally has broadened as investors bet US rate cuts will ensure an economic soft landing. About two-thirds of S&P 500 stocks outperformed the index in the third quarter. The average stock spiked 9.2 per cent, almost double the S&P 500′s quarterly return. Increasingly confident investors are looking beyond the tech giants, suggesting the magnificent seven’s reign may be over — for now at least.