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The Tech Titans: Magnificent Seven Rise and Fall in 2023. Can the Fab Four Maintain Dominance in 2024?

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Surge and Stumble

As the sun set on 2023, the โ€œMagnificent Sevenโ€ tech stocks basked in the glory of their roaring success, reminiscent of the epic Western. These industry behemoths, from Amazon to Meta Platforms, captivated investors with soaring double and triple-digit gains, dominating the market with a blend of innovation and expertise in their respective niches โ€“ from electric vehicles to AI.

Shifting Power Dynamics

However, as the curtains raised on 2024, the formerly unassailable Magnificent Seven showed cracks in their armor. While some stumbled, losing ground in the stock market race, two notable members, Tesla and Apple, saw their shares plummet into double-digit declines. Yet, amid this turbulence, a new narrative emerged where four stalwarts continued to ascend, hinting at a potential changing of the guard within the S&P 500. Shall we witness the rise of the โ€œFab Fourโ€ this year?

An investor cheers in front of a laptop.

Image source: Getty Images.

Thriving Quartet

Foremost, letโ€™s unveil the four dynamic entities propelling the market upwards. Nvidia, Meta, Amazon, and Microsoft have emerged as frontrunners, boasting impressive double-digit surges since the dawn of the fiscal year. These titans, among the top five weightiest stocks in the S&P 500, hold the potential to steer the index to greater heights, offering investors avenues for direct investment or through index-tracking funds like the SPDR S&P 500 ETF Trust.

But what drives this current trajectory of success amidst their peersโ€™ stumbles? Looking back at the Magnificent Sevenโ€™s record-breaking streak in 2023, it becomes clear that the investor exodus towards growth stocks, particularly those intertwined with cutting-edge technologies like AI, ignited this revolution. With the global AI market projected to surpass $1 trillion by decade-end, these companies adept in AI might be the torchbearers of the future.

Vanguard in AI

Nvidia, reigning over the AI chip domain with an 80% market share, reported a meteoric rise in triple-digit earnings in the recent quarter, bolstering its position as a torchbearer of innovation. Meta Platforms declared a significant commitment to AI as its premier growth area this year, fueling its projects with an influx of 600,000 GPUs. Amazon leverages AI to optimize its e-commerce operations and extends AI offerings via Amazon Web Services to empower clients on the AI journey.

Meanwhile, Microsoftโ€™s early AI investments in OpenAI, culminating in a $13 billion outlay, have led the tech giant to integrate AI pervasively across its platforms, recognizing its paramount role as the quintessential technology of our era.

Valuation Dynamics Unveiled

Collectively, these strides unravel a landscape where AI aficionados might gravitate towards these seasoned AI champions. The valuation analysis unveils an appealing proposition for investors eyeing the potential vanguards of the AI revolution, with reasonable price tags adorning these growth stocks, accentuated by a storied history of profitability and revenue escalations.

AMZN PE Ratio (Forward) Chart

AMZN PE Ratio (Forward) data by YCharts.

Thus, a beckoning opportunity arises for investors keen on partnering with pioneers poised to steer the AI evolution. While forecasting the marketโ€™s short-term trajectory remains an enigma, one can posit that the Fab Four possess the mettle to sustain and potentially dominate the unfolding scene this year. More significantly, these tech stalwarts, steeped in years of stellar growth, fortified market positions, and futuristic aspirations, might embody a win-win proposition for long-term investors.

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John Mackey, ex-CEO of Whole Foods Market, now an Amazon arm, is a Motley Fool board participant. Randi Zuckerberg, former Facebook market development director and sibling to Meta Platformsโ€™ CEO Mark Zuckerberg, holds a seat on The Motley Foolโ€™s board. Suzanne Frey, an Alphabet executive, is part of The Motley Foolโ€™s board ensemble. Adria Cimino holds positions in Amazon and Tesla. The Motley Fool harbors interests in and endorses Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. Additionally, The Motley Fool advocates the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool follows a disclosure policy.

The authorโ€™s viewpoints expressed herein reflect individual opinions and may diverge from those upheld by Nasdaq, Inc.

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