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Talking heads. An address. The son of destiny. Even the largest groups dissolve, and the same thing happens on Wall Street. The Magnificent 7 (Alphabet, Nvidia, Microsoft, Meta, Apple, Amazon and Tesla) just don’t seem to have the stage presence they used to. While Nvidia and Alphabet outperformed the S&P 500 last year, the other five stocks dragged the index lower.
Meanwhile, artificial intelligence has put a spotlight on companies that are at the forefront of new technology. Nvidia has gone from being the smallest part of the Mag 7 to by far the largest, while Google has attracted attention for its DeepMind division. Private companies, particularly OpenAI and Anthropic, are taking up more space in the room as they rack up massive investment rounds and their chatbot products become everyone’s personal therapists and email writers.
The Mag 7 won’t disappear overnight, or maybe ever, but a new group of companies is dominating the popular narrative.
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The term The Magnificent Seven came into vogue in 2023, coined by Bank of America strategist Michael Hartnett and based on the western film of the same name. The group of companies has grown to represent a massive share of the S&P 500 over the past decade, and its percentage of the index’s market value has risen from around 13% in 2016 to 33% earlier this month.
However, don’t let the growth fool you:
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The Mag 7 share of the S&P 500 has retreated from last year’s level as of this month and is increasingly dominated by companies that have adapted to the AI era. Nvidia now accounts for more than a fifth of the Mag 7’s total market share. The chipmaker, which in recent years has shifted its focus from gaming to AI, is worth almost more than the three least valuable members of the group (Amazon, Meta and Tesla) combined.
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Like Nvidia, Microsoft ranks higher in the group compared to its peers, Moses Singer partner Rob Rosenberg told The Daily Upside. While Nvidia has its chips, Microsoft has its AI assistant Copilot, as well as its huge investments in OpenAI and Anthropic, the latter of which will have its models integrated into Copilot starting this month.
As the narrative shifts toward AI and some of the S&P’s biggest players struggle to boost the index they dominate, Hartnett wrote in a note that the group should get a new nickname: Lagnificent 7. Fittingly, Hartnett said The Wall Street Journal that in the original Western film only some of the characters survived.
And just like in the Wild West, investors are abandoning some companies in the desert. Tesla, once a favorite among retail traders, saw activity among ordinary investors fall 43% last year from its 2023 peak. The company’s sluggish sales of electric vehicles, as well as the polarizing antics of its CEO, have upset less diehard shareholders.
Meanwhile, the companies getting the most attention are integrating into new cliques. One that has been making headlines: MANGO, an acronym for Microsoft, Anthropic, Nvidia, Google DeepMind and OpenAI. (There is some debate online about whether M and A are actually Meta and Apple, which would overlap even more with the Mag 7.)
Venture capitalist Kristina Shen told CNBC that this handful of AI companies now control consumer trust. Rosenberg, who wrote about the switch to MANGO last year, told The Daily Upside: “It’s really about what’s stealing all the air out of the room.”
It’s not that the Mag 7, or its FAANG (Facebook, Apple, Amazon, Netflix and Google) predecessor, have lost market dominance. They are all still titans in their respective fields. But AI is now driving the conversation on Wall Street and at the dinner table, as well as attracting hundreds of millions of dollars in new money.
MANGO’s impact is difficult to measure for now because two of its titans, OpenAI and Anthropic, remain private companies. However:
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Rosenberg hopes AI companies can go public when enthusiasm (and funding) wanes. Compared to the Internet era, when companies were trying to quickly cash out their initial investment through IPOs, Rosenberg said, “People are playing a longer game.”
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OpenAI is reportedly considering an initial public offering later this year that could be worth up to $1 trillion. Anthropic has no known plans to go public, but it will be a giant when it does: Its valuation rose to $380 billion after its February funding round. Together, they had arrived on the market as a huge failure.
Nvidia and Microsoft have separated themselves from the Mag 7 by making AI the core of their businesses. Other companies may expand their AI-related projects as the revenue streams they are best known for become less relevant. Amazon and Alphabet divisions to watch, Rosenberg said, include:
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AWS, Amazon’s cloud division, is becoming increasingly important as AI demands more and more computing power. AWS revenue grew 24% year over year in the most recent quarter to account for nearly 17% of sales at Amazon, which built its empire on e-commerce.
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DeepMind, the innovative Alphabet laboratory that created an artificial intelligence program to advance biological research through protein analysis. (He even won the 2024 Nobel Prize in Chemistry.) Now, its scientists are creating deep learning models that make predictions about genes; They are being used in research into cancer and other diseases.
Meanwhile, Apple has had less success with its AI efforts after failing to impress with its much-delayed, smarter Siri update. Meta’s AI integrations have also failed to make a big splash. And, rounding out the Mag 7, Tesla’s AI-powered robotaxis and humanoid robots don’t seem like enough to put it at the center of the AI conversation.
Investors have been bundling the most dynamic companies with attractive terms since the 1960s, when Nifty Fifty stocks dominated industries. There have been WATCH (Walmart, Amazon, Target, Costco and Home Depot), Beijing’s BAT (Baidu, Alibaba and Tencent) and Granolas (11 European companies that included Novo Nordisk and Roche). Like its namesake, MANGO can be sticky. Rosenberg said what sets the group apart is the industry-wide influence of AI, which is reshaping everything from medicine to education.
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