The dominance of Meta, Microsoft, and Nvidia, along with Apple, Alphabet, Amazon, and Tesla, the so-called Magnificent Seven, is beginning to rattle nerves among some investors and analysts who fear that a speculative bubble is forming.
But Nigel Green, CEO of one of the world's financial advisory and asset management organisations, says it is currently more indicative of “a fundamental shift”, primarily propelled by advancements in artificial intelligence (AI).
His comments come as these tech behemoths up to February not only account for about half of the gains in the entire S&P 500 but also contribute to over a quarter of the index's total market capitalization.
US stocks set another record on Thursday following some mixed reports on the economy.
The S&P 500 rose 29.11 points, or 0.6%, to 5,029.73 and squeaked by its prior all-time high set last week. The Dow Jones Industrial Average gained 348.85, or 0.9%, to 38,773.12, and the Nasdaq composite climbed 47.03, or 0.3%, to 15,906.17.
Nigel Green comments: “Nvidia, in particular, has been making headlines with an astonishing 50% surge in its stock value within the first two months of the year.
“However, labelling this surge as a bubble requires a nuanced understanding of the underlying factors driving these unprecedented gains.
“Rather than a speculative mania, the market’s response to the Magnificent Seven seems to be grounded in the transformative power of AI, which is reshaping entire industries, enhancing productivity, and paving the way for the creation of new ones.
“At the heart of this paradigm shift is the increasing integration of AI technologies across various sectors.
“Meta’s focus on the metaverse, Microsoft’s investments in cloud computing and AI-driven solutions, and Nvidia’s prowess in graphics processing units (GPUs) for AI applications underscore the importance of these companies in shaping the tech landscape. Their combined market capitalization reflects investor confidence in the long-term potential of AI to drive innovation, efficiency, and profitability,” notes the deVere CEO.
One key factor contributing to the sustained growth of the Magnificent Seven is the ongoing expansion of AI applications.
Nigel Green explains: “These companies are not merely riding the wave of current technologies but actively shaping the future of AI.
“Meta, for instance, is investing heavily in AI research to create more immersive and interactive experiences within the metaverse. Microsoft’s Azure cloud platform leverages AI to offer scalable and intelligent solutions for businesses, demonstrating a commitment to AI-driven transformation.”
He continues: “Nvidia's remarkable stock performance can be attributed to the increasing demand for GPUs
