Magnificent Seven Face Tariff Turmoil but Eye Potential Recovery
The tech giants known as the “Magnificent Seven”—Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), NVIDIA (NVDA), Tesla (TSLA), Alphabet (GOOGL), and Meta (META)—are currently experiencing significant challenges due to ongoing tariff issues. The Roundhill Magnificent Seven ETF (MAGS) has reported a 5.9% decline over the past month, with data as of April 14, 2025.
Despite the recent setbacks, analyst Michael Graham from Canaccord Genuity suggests that a turnaround for these companies could be on the horizon after the conclusion of first-quarter earnings season, as noted in a CNBC report.
Investor confidence appears to be slowly returning. After two years of remarkable growth powered by the AI boom, these tech giants have seen a substantial cooling period, with their valuations dropping to levels that were prevalent before the launch of ChatGPT in late 2022.
Cautious Outlook Amid Improved Trade Sentiment
The latest pause in retaliatory tariffs on electronics offers some relief, but Graham believes that these companies will adopt a cautious tone in their future guidance. Many remain susceptible to potential regulatory actions, a reflection of the still-volatile trade environment. Despite recent improvements, risks remain high. However, the post-Q1 earnings period may provide more clarity on the companies’ future directions.
Mag-7 Valuations Return to Pre-AI Boom Levels
Stock prices among these tech leaders have dropped significantly. For instance, Amazon’s trailing 12-month price-to-earnings (P/E) ratio now stands at 32, a steep decline from 86 when ChatGPT launched. NVIDIA, previously viewed as the top player in the AI sector, has also seen its P/E ratio decrease to 36 from the mid-50s.
Other major tech companies display similar valuation trends. Apple has a P/E of 29, nearing its pre-AI rally level of 25. Alphabet’s remains at 18, consistent with late 2022 figures, while Microsoft sits at 29, slightly above its previous P/E of 26.
Tesla and Meta are notable exceptions to this trend. Tesla’s P/E ratio has risen to 119, significantly higher than its 2022 level of 70. Conversely, Meta Platforms’ ratio is 23 compared to just 10 prior to the AI boom. Despite these variances, most of the Magnificent Seven are still experiencing corrections or bear market conditions.
Recent Rally Hints at a Possible Turning Point
Last week brought a wave of bargain-hunting as investors reacted to market volatility. The announcement of potential tariff exemptions on electronics may serve as a strong tailwind for recovery. Currently, many investors are leaning towards individual stock selections within the Magnificent Seven, motivated by each company’s unique strengths and weaknesses. However, analysts agree the core strengths of the group—solid financial positions and competitive advantages—remain intact.
Bottom Line
While opportunities exist within the Magnificent Seven, the era of broad-based rallies has likely transformed into a period of selective stock picking and tempered optimism. Despite more attractive valuations, investors are less inclined to view the group as the stalwart of Wall Street.
The Magnificent Seven may have lost some of their luster. Stock performances have diverged due to factors such as the emergence of cost-effective AI alternatives, like DeepSeek, and the varying capacities of companies to navigate broader economic uncertainties.
ETF Picks
Microsoft and Alphabet have demonstrated more resilience compared to their peers over the past challenging month. Exchange-traded funds (ETFs) heavily focused on these companies, such as the iShares Global Tech ETF (IXN) for Microsoft and the Fidelity MSCI Communication Services Index ETF (FCOM) for Alphabet, present favorable options. Additionally, with ongoing demand for semiconductors, NVIDIA warrants attention, particularly through its focused ETF, the Strive U.S. Semiconductor ETF (SHOC).
For those interested in broader exposure to these companies, options like MAGS, Vanguard Mega Cap Growth ETF (MGK), Invesco S&P 500 Top 50 ETF (XLG), and iShares S&P 100 ETF (OEF) are available.
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Amazon.com, Inc. (AMZN): Free Stock Analysis report
Apple Inc. (AAPL): Free Stock Analysis report
Microsoft Corporation (MSFT): Free Stock Analysis report
NVIDIA Corporation (NVDA): Free Stock Analysis report
Tesla, Inc. (TSLA): Free Stock Analysis report
Alphabet Inc. (GOOGL): Free Stock Analysis report
Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports
Invesco S&P 500 Top 50 ETF (XLG): ETF Research Reports
iShares Global Tech ETF (IXN): ETF Research Reports
Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
iShares S&P 100 ETF (OEF): ETF Research Reports
Meta Platforms, Inc. (META): Free Stock Analysis report
Strive U.S. Semiconductor ETF (SHOC): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
