The 7 Major Tech Stocks Driving the US Stock Market This Year Are Expected to Lose Momentum Next Year

Overall Upward Trend... Investors Turning Attention to Soft Landing

There is a forecast that the momentum of the seven major tech stocks leading the U.S. stock market this year, known as the 'Magnificent Seven,' will subside.

Bloomberg reported on the 27th (local time) that "while a soft landing scenario for the U.S. economy next year implies a rise in the U.S. stock market, it is pessimistic about the seven major tech stocks achieving tremendous performance." Although the overall stock market is expected to continue its upward trend, it is unlikely to show explosive growth like this year.

[Image source=Reuters Yonhap News]

The seven major tech stocks?Apple, Microsoft (MS), Amazon, Nvidia, Alphabet, Meta, and Tesla?experienced a surge of up to 100% by mid-July this year, fueled by the artificial intelligence (AI) boom. As these seven tech stocks performed well, the S&P 500 index also rose by about 20%. However, the situation changed after the U.S. Federal Reserve (Fed) raised interest rates in July. Since the end of July, the seven tech stocks have risen by only 7%, while the overall market increase was limited to 4%.

Bloomberg generally analyzed the outlook for the seven major tech stocks next year as positive. MS is expected to grow in AI and cloud sectors by integrating OpenAI's ChatGPT technology into its products. Jamie Myers, chief equity analyst at Raftertangler Investment, stated, "MS has demonstrated the potential to generate revenue with AI-powered products." Amazon's stock price surged significantly after October, showing an 80% increase this year. Stable growth in Amazon Web Services (AWS) cloud division drove the improvement in performance.

Nvidia's stock price rose more than 237% this year, recording the best performance in the S&P 500 and Nasdaq 100. According to data compiled by Bloomberg, Wall Street last year projected Nvidia's 2025 revenue to grow by 150%. Alphabet, Google's parent company, which launched the large language model (LLM) 'Gemini,' saw its stock price rise more than 60% this year. Chief strategist Williams analyzed, "Google and Meta are relatively undervalued compared to the other five major tech stocks."

However, Bloomberg predicted that it would be difficult for their stock prices to follow the same upward trajectory next year as this year. Many investors are considering a soft landing and turning their attention to small-cap tech stocks or other sectors that underperformed this year. Rice Williams, chief strategist at Spouting Rock Asset Management, said, "The only way for the seven major tech stocks to maintain their status next year is if the soft landing fails," adding, "From a portfolio construction perspective, pausing investment in the seven major tech stocks for a while is a good loss prevention measure."

There are also claims that the Magnificent Seven craze is similar to the IT bubble of the late 1990s. MarketWatch reported on the 25th that Richard Bernstein, CEO of Richard Bernstein Advisors, described the Magnificent Seven craze as "extreme speculation" in a phone interview. He argued that "market performance shows that investors were convinced there were only seven growth stories," emphasizing the need to focus on small-cap stocks. He also stated that unlike this year, when investors concentrated on a few stocks, there is a need to diversify portfolios.