Key Points: - After driving gains for the S&P 500 in 2023, five of the Magnificent 7 stocks (Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia, and Tesla) have outperformed the index so far in 2024. - Growth concerns have impacted Tesla's shares, while Apple's gains in the first half lagged behind Nvidia and other Magnificent 7 stocks. - Some experts believe that meeting investors' high expectations might be challenging, while others think the tech rally could expand across the market. - Despite artificial intelligence (AI) driving the outperformance of most Magnificent 7 stocks in 2024, a few have struggled to keep up. - Experts warn that the lofty expectations for the group might become harder to meet, raising questions about the sustainability of big tech's AI-driven momentum. Most of the Magnificent 7 Outperformed the S&P 500 in 2024, Apple and Tesla Lagged: - In 2024, the performance divergence among the Magnificent 7 stocks became more evident. While Nvidia doubled in value, Tesla lost nearly 1%. - Meta shares gained 44%, and Alphabet rose by 33%. Amazon and Microsoft climbed by 30% and 22%, respectively, driven by AI-related growth. These stocks, along with Nvidia, outperformed the S&P 500, which rose by 16%. Apple slightly lagged behind, with a 15% gain following AI announcements in the second quarter. - Tesla is the only Magnificent 7 stock that declined this year, leading to discussions about whether it should be considered part of the group.

However, an impressive surge in Tesla's stock in July almost erased year-to-date losses after better-than-expected deliveries in Q2. High Expectations Could Make It Challenging for Magnificent 7 Stocks to Impress Investors: - Investor expectations for the Magnificent 7 have become a point of concern. Steve Sosnick, the chief strategist at Interactive Brokers, questions how these companies will meet AI-driven expectations, given long development timelines. - Goldman Sachs analysts forecasted 30% year-over-year earnings growth for Nvidia, Meta, Alphabet, Amazon, Microsoft, and Apple in Q2, compared to 9% for the S&P 500 and 5% for the rest of the market. Disappointments are likely to face severe consequences, according to the analysts. Magnificent 7's Movements Will Impact the Broader Market: - The performance of Nvidia, Meta, Alphabet, Amazon, and Microsoft in the first half of this year accounted for 62% of the S&P 500's return. - The concentration of market leadership in a few stocks has made the market top-heavy, which could have significant implications, stated Steve Sosnick. However, UBS Chief Investment Officer Solita Marcelli advised investors not to overlook opportunities beyond recent US tech leaders and expects the market rally to expand.