Magnificent 7: Too much of a good thing?

Justin Burgin, Vice President of Equity Research – Ameriprise Financial 
April 21, 2025
Mature businessman looking out of window.

Over the past few years, the seven largest market cap companies in the S&P 500 Index, collectively known as The Magnificent 7, or Mag 7 for short, drove significant market returns. However, the trend of the past two-plus years shifted in late 2024 and early 2025. Around mid-March, the Mag 7 entered bear market territory, defined as a 20% drop from a high in the previous 12 months. The Mag 7 continued to experience volatility through April’s tariff announcements.  

What happened? Here's what may be driving the Mag 7 pullback and where investors might turn as uncertainty continues.  

Looking back at Mag 7 at its peak 

The Mag 7 includes Alphabet Inc., Apple Inc., Amazon.com, Meta Platforms, Microsoft Corp., NVIDIA Corp., and Tesla Inc. The combination of their sheer size and investor obsession with technology themes such as artificial intelligence (AI) culminated in some of the world's largest publicly traded companies.  

These companies became so prominent in market capitalization (the number of outstanding shares multiplied by the price) that they dwarf most countries' annual gross domestic product (GDP). To put an even finer point on their sheer size, at the peak of the Mag 7 dominance, these seven companies collectively held a market capitalization of just over $17 trillion (for reference, the U.S. GDP was just under $30 trillion in 2024).  

How the Mag 7 contributed to sector returns 

In addition to outsized market performance in 2023 and 2024, the Mag 7 also drove most of the returns in communication services, consumer discretionary and technology. Across these sectors, the Mag 7 rode the simultaneous waves of AI, electric/autonomous vehicles, mobile phones, and cloud computing buildouts. Collectively, these three sectors now account for nearly 50% of the overall weight of the broad S&P 500 Index, and for some, where the Mag 7 went, so went the market.  

Source: FactSet, Ameriprise Financial Services, Inc. Data as of 3/14/2025. These figures are shown for illustrative purposes only and are not guaranteed. An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. 

 

What is driving the 2025 Mag 7 pullback? 

We attribute the 2025 pullback to several factors, including how companies monetize their multi-year artificial intelligence (AI) investments, and uncertainty over policy decisions, including tariffs, valuation levels, and future growth rates. In the chart below, you can compare how several major U.S. stock indices and a weighted index of the Mag 7 have performed in 2025 through mid April. 

Source: FactSet, Ameriprise Financial Services, Inc. Data as of 3/14/2025. These figures are shown for illustrative purposes only and are not guaranteed. An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. 

 

How the rest of the S&P 500 performs without Mag 7 

When we exclude the Mag 7, the overall performance this year for the remaining 493 companies in the S&P 500 Index is not as “bad” as it appears during the first few months of 2025. For instance, the broad market fell approximately 15% by early April from the first of the year, while the Mag 7 was down approximately 25% over the same period.   

While this may not be much comfort to portfolios heavily skewed toward the biggest companies in the index, it also underscores how a diversified portfolio is essential for long-term investors. 

In the chart below, we show how the Mag 7 influenced market performance going back to early 2020. While there are multiple periods when the 493 companies in the S&P 500 underperformed the Mag 7, there are also periods when these companies outperformed, including the first few months of 2025. 

Source: FactSet, Ameriprise Financial Services, Inc. Data as of 3/14/2025. These figures are shown for illustrative purposes only and are not guaranteed. An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. 

 

With uncertainty high, where can equity investors turn beyond the Mag 7?

With expectations for market leadership to broaden beyond the Mag 7, investors can be more selective when making tactical decisions. A more targeted approach provides an opportunity to increase exposure to more thematic market segments without being tied to legacy and potentially slower-growth parts of the economy. For instance, we believe well-positioned industries exist within larger sectors of the market including MedTech (health care sector), capital markets (financials), natural gas (energy) and software/cybersecurity (technology).  

The bottom line: For investors, oftentimes too much of a good thing can be… too much of a good thing. Thus far in 2025, outsized weakness in the largest stocks is a reminder that a well-diversified portfolio can help long-term investors ride out short-term market volatility. For these patient, long-term investors, a diversified investment portfolio includes exposure to multiple asset classes (including stocks, bonds, alternatives and cash) and is tailored to your risk profile.    

Review your investment strategy with your financial advisor 

To discuss your investments and long-term strategy, connect with an Ameriprise financial advisor. An advisor can help ensure your portfolio is well-diversified and positioned to help you weather an uncertain market. 

Prepare your investment portfolio to weather market ups and downs.

Or, request an appointment online to speak with an advisor. 

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At Ameriprise, the financial advice we give each of our clients is personalized, based on your goals and no one else's. 

If you know someone who could benefit from a conversation, please refer me.

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Sources: FactSet and Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as Ameriprise Financial and its analysts. They are not affiliated with Ameriprise Financial, Inc. 
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.  
Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.  
Diversification does not assure a profit or protect against loss. 
Alternative investments cover a broad range of strategies and structures designed to be low or non-correlated to traditional equity and fixed-income markets with a long-term expectation of illiquidity. Alternative investments involve substantial risks and may be more volatile than traditional investments, making them more appropriate for investors with an above-average tolerance for risk. 
There are risks associated with fixed-income investments, including credit (issuer default) risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities. 
Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value. 
Past performance is not a guarantee of future results. 
An index is a statistical composite that is not managed. It is not possible to invest directly in an index. 
Definitions of individual indices and sectors mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section.  
The S&P 500 Index is a basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value (shares outstanding times share price), and its performance is thought to be representative of the stock market as a whole. The S&P 500 index was created in 1957 although it has been extrapolated backwards to several decades earlier for performance comparison purposes. This index provides a broad snapshot of the overall US equity market. Over 70% of all US equity value is tracked by the S&P 500. Inclusion in the index is determined by Standard & Poor’s and is based upon their market size, liquidity, and sector. 
The S&P 500 Telecommunication Services Index comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) telecommunication services sector. 
The S&P 500 Consumer Discretionary Select Sector Index measures the performance of consumer discretionary stocks, as classified by the Global Industry Classification Standard (GICS). Every Select Sector stock is also a constituent of the S&P 500 Index. It is float-adjusted market capitalization weighted. 
The S&P 500 Information Technology Index comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) information technology sector. 
The NASDAQ Composite index measures all NASDAQ domestic and international based common type stocks listed on the Nasdaq Stock Market. 
The Dow Jones Industrial Average (DJIA) is an index containing stocks of 30 Large-Cap corporations in the United States. The index is owned and maintained by Dow Jones & Company. 
The Russell 2000 Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set. The Russell 2000 includes the smallest 2000 securities in the Russell 3000.  
Magnificent 7 companies mentioned are not affiliated with Ameriprise Financial, Inc. 
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. 
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