I wish I knew what the Magni cent Seven were, but I’m too embarrassed to ask

The Magnificent Seven is a nickname for the group of companies that has been responsible for much of the gains in the US stockmarket over the past year or so. The term became popular after Bank of America analyst Michael Hartnett used it in a research note in May 2023, and has largely taken over from the FAANGs – Facebook (Meta), Amazon, Apple, Netflix and Google (Alphabet) – as the preferred shorthand for the large-cap growth stocks that are dominating the market.

The Magnificent Seven has several names in common with the FAANGs – Alphabet, Apple, Amazon and Meta – and also includes Microsoft, which was already being treated as a member of the FAANGs in most analyses. Unwieldy attempts to expand the acronym to include it – such as FANMAG – never took off. The Magnificent Seven also includes Nvidia – a leading beneficiary of the AI boom and the hottest stock in the world when the term was coined – and Tesla. Netflix, which is smaller than the other FAANGs, is not included.

Six of the seven currently have a market capitalisation of more than $1trn, while Tesla also briefly passed that mark in 2021 before slipping back. Collectively, the Magnificent Seven represents 30% of the

total value of the S&P 500 and 40% of the Nasdaq-100.

Informal labels such as Magnificent Seven or FAANGS tend to be shortlived, but these groupings can provide a better sense of what’s driving the market than traditional sectors.

Magnificent Seven companies are typically described as tech giants, Tesla being the arguable exception. Their businesses revolve around digital technology – either hardware or software. Yet most are not listed in the tech sector. Index compilers class Apple, Microsoft and Nvidia as information technology, but Alphabet and Meta as communications services, while Amazon and Tesla are consumer discretionary.