Magnificent Seven no longer a monolith as performance continues to diverge

By Joseph Adinolfi

Nvidia continues to soar while Apple is headed for its longest losing streak since September

The Magnificent Seven stocks are no longer a market monolith.

After driving the bulk of the S&P 500 index's 2023 advance, the group of seven megacap companies - typically defined as Nvidia Corp. (NVDA), Apple Inc. (AAPL), Alphabet Inc. (GOOGL), Microsoft Corp. (MSFT), Tesla Inc. (TSLA), Meta Platforms Inc. (META) and Amazon.com Inc. (AMZN) - have seen their performance diverge in 2024.

The magnitude of this divergence has increased recently, as share prices of Nvidia Corp. have continued to power higher, leaving other members of the group in the dust, with Apple on track for its longest losing streak since September on Wednesday, according to Dow Jones Market Data.

Shares of Nvidia, which has been the biggest beneficiary of the artificial-intelligence software boom, have already risen nearly 80% since Jan. 1, according to FactSet data. The next-best performer in the group has been Meta Platforms Inc., with a gain of 40%. By comparison, Apple is down 12%, Alphabet is down 6% and Tesla is down 30%.

The divergence was on display Tuesday, as members of the group shed a combined $233 billion in market value, helping to drive a 1.7% drop in the Nasdaq Composite and a 1% drop in the S&P 500. In keeping with its trend of outperformance, Nvidia Corp. was the only member of the group to finish higher, rising 0.9%.

See: 'Magnificent Seven' shed $233 billion in market cap, dragging down the stock market

A team of analysts at Bespoke Investment Group illustrated this trend in a recent graphic shared on X, the social-media platform formerly known as Twitter, where they compared each member of the Magnificent Seven, as well as Advanced Micro Devices Inc. (AMD) and Netflix Inc. (NFLX), to their 50-day moving average.

While Nvidia has seen its shares enter "extreme overbought" territory, Apple shares have become extremely oversold for the first time since March 2020, when U.S. stocks endured a sharp selloff as COVID-19 spread around the world, according to Bespoke.

The team based these categories on the distance between each stock's Tuesday close and its 50-day moving average. Apple is trading three standard deviations below the medium-term average, which tells investors that the stock has fallen sharply over a relatively short period.

While many market skeptics have attributed Nvidia's gains to traders' "fear of missing out," Kevin Gordon, senior investment strategist at Schwab, told MarketWatch that the widening performance gap among the megacap stocks appears to be rooted, at least in part, in fundamentals.

According to FactSet data, Nvidia is expected to see its earnings per share grow by more than 90% in 2024 compared with 2023. That growth figure is 35% for Meta, 17% for Alphabet, and just 7% for Apple. Tesla, meanwhile, is expected to see its earnings shrink by 1.9%.

"It's not even just a price difference, it's actually a fundamental difference," Gordon said during an interview with MarketWatch. "That's why we want to get away from talking about the Mag 7 as a monolith."

"There's a pretty big difference between revenue growth and expectations and earnings expectations for the Nvidias of the world and the Teslas."

Members of the elite group continued to see uneven trading on Wednesday, with Apple shares on track to sink for a sixth straight session, Dow Jones data showed.

Tesla, Alphabet and Microsoft were also trading in the red. Meanwhile, Nvidia, Amazon and Meta were building on their year-to-date gains, with Nvidia on track to rise nearly 3%, according to FactSet data.

All three of the major U.S. equity indexes were trading higher, with the S&P 500 SPX up 0.7% at 5,115, the Nasdaq Composite COMP up 0.8% at 16,066, and the Dow Jones Industrial Average DJIA up 195 points, or 0.5%, to 38,781.

-Joseph Adinolfi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-06-24 1129ET

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