The so-called Magnificent Seven lost some luster in the latest quarter, as they proved no longer the big market drivers they were earlier this year.
The seven largest tech stocks — Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
Alphabet Inc.
GOOG,
GOOGL,
Amazon.com Inc.
AMZN,
Nvidia Corp.
NVDA,
Tesla Inc.
TSLA,
and Meta Platforms Inc.
META,
— could perhaps better be known as the “messy seven” after a third-quarter performance that was far less correlated with the S&P 500
SPX
than what was seen in the second quarter.
From the archives (July 2023): These 7 momentum stocks ignited the market. Look out when they start to fall.
Four members of the Magnificent Seven — Alphabet, Meta, Nvidia and Amazon, outperformed the S&P 500’s 3.6% decline in the third quarter, and among those, all but Amazon’s stock logged gains. Shares of Tesla, Microsoft and Apple each posted declines and lagged the index.
The seven stocks had an average 0.47 correlation with the S&P 500 during the third quarter, which is seen as a modest correlation. That’s notable because the Magnificent Seven make up a large portion of the market-weighted S&P 500, constituting 29.4% of the index’s total market cap as of Thursday’s close, according to Dow Jones Market Data.
See also: September’s U.S. stock-market rout left just 1 winner as defensive sectors failed to provide shelter
In the second quarter, however, when the S&P 500 moved more than 8% higher, the correlation with the Magnificent Seven was far stronger, at 0.87.
Back then, all seven names outperformed the S&P 500, with Nvidia shares leading the pack amid heavy optimism around artificial-intelligence.
The Big Tech names each play into AI to varying degrees, but the AI trade has faded lately as investors become more discerning. Wall Street wants to see real financial windfalls behind AI initiatives, not just talk.
The third-quarter correlation between Big Tech and the broader market harkens back to the first quarter, when there was a 0.48 correlation, even as the Magnificent Seven all beat out the S&P 500 then.
Read: There’s a sale on corporate bonds. How to add cheap Apple, Disney and Microsoft bonds to your portfolio.
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