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Prediction: A New Stock Will Join the Magnificent 7

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The Magnificent 7 stocks of Microsoft, Apple, NVIDIA, Alphabet, Amazon, Meta, and Tesla have become the talk of the market. They now make up about 30% of the S&P 500, a historic concentration of the largest stocks in the market, and contributed the majority of the S&P 500’s returns last year.

Yet, the trends driving the Magnificent 7 – including the growth of artificial intelligence – are impacting a large number of stocks. Let’s take a look at what stocks could rise to join the Magnificent 7 in the next decade.

How Big is Each Magnificent 7 Stock?

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At the end of the day, there’s no “rule” for joining the Magnificent 7, it’s just a group created by the media to describe some of the largest stocks in the market. In addition, they’ve all had strong stock gains in recent years.

And to be sure, most of the Magnificent 7 are some of the S&P 500’s biggest contributors, but Tesla is actually now the 11th largest stock in the S&P 500 and trails its Magnificent 7 peers by a large amount.

Company  Market Cap (Millions)  In the Mag 7?
Microsoft Corporation 3018391.8 Yes
Apple Inc. 2636392.34 Yes
NVIDIA Corporation 2154239.14 Yes
Amazon.com, Inc. 1821427.31 Yes
Alphabet Inc. 1688543.01 Yes
Meta Platforms, Inc. 1289871.51 Yes
Berkshire Hathaway Inc. 873945.48 No
Eli Lilly and Company 686051.34 No
Broadcom Inc. 606488.24 No
Visa Inc. 562591.16 No
Tesla, Inc. 558421.15 Yes

So, the uniting factor of the Magnificent 7 is mostly that they’re large companies at the leading edge of technology rather than just being the biggest stocks in the market.

Yet, in recent years the media has had numerous groups including “FANG” and “FAANG” which at times included Netflix instead of NVIDIA. So, the popular term for the market’s “hottest” stocks can and will change.

Let’s take a look at some other stocks that could join the Magnificent 7.

Magnificent 7 Contenders

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I’ll group contenders by a few industries that make the most sense. While Berkshire Hathaway is worth nearly a trillion dollars and owns a huge amount of Apple, it will likely never trade like technology stocks, so it’s unlikely to be included in media reports about a group of stocks leading the market.

Every stock in this group will have dynamics that if it has a strong 2024, could soon be included in an expanded “Magnificent 8” or if the market keeps rising… Even a higher number!

Semiconductor Contenders for the Magnificent 7

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As you can see from the list above, Broadcom (Nasdaq: AVGO) is already larger than Tesla and has had strong price appreciation recently. Its stock is up 107% across the past year. In addition, the company is strongly associated with AI and recently reported AI revenue should top $10 billion this year.

Two other strong contenders are Taiwan Semiconductor (NYSE: TSM) and ASML (Nasdaq: ASML). The ‘challenge’ for both these companies is they’re foreign and not included in the S&P 500, so they might not be included.

Software Contenders for the Magnificent 7

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Software-as-a-Service was all the rage in 2020 and 2021 with the rise of companies like Zoom, Okta, Snowflake, and other SaaS players that traded for nosebleed valuations. Most SaaS companies have come back to Earth, but their stocks are starting to move northward again.

The three strongest software companies that could join the Magnificent 7 are Adobe (Nasdaq: ADBE), ServiceNow (NYSE: NOW), and Salesforce (NYSE: CRM). Salesforce is in the DOW already, and the largest of the group at nearly $300 billion in market cap. It returned 66% this year, and with a strong performance in 2024 you could see its name getting added to a list of “Magnificent” stocks.

Adobe is smaller but has strong ties to generative AI that could make it a media darling if it continues performing. ServiceNow is the smallest on this list at $155 billion but has returned 66% in the past year. It’s another stock with a strong association with AI that could become the poster child of another SaaS-stock rally.

Non-Technology Stock Contenders for the Magnificent 7

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Finally, if the broader market rally outpaces technology stocks, you could see some names that aren’t traditionally associated with technology being added to the Magnificent 7.

Eli Lilly (NYSE: LLY) isn’t a “tech stock,” but it is worth $686 billion, and has returned an astonishing 144% in the past year. Best of all, like technology stocks it’s riding a massive trend thanks to weight-loss drugs.

Another contender could be Visa (NYSE: V), which is worth $562 billion. Visa doesn’t have the “sizzle” of other technology stocks, it simply plods along with consistent growth and doesn’t have a strong association with trends like “AI.” This has been great for its long-term returns, but it might not be exciting enough for the media to lump it in with the likes of NVIDIA and Meta.

My Pick for the Next Magnificent 7 Stock

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After reviewing all these stocks, my pick for the next Magnificent 7 stock is Netflix (Nasdaq: NFLX). There are four key reasons.

  • It Has Been There: Netflix used to be the ‘N’ in FANG. It’s been a media darling in the past so to imagine it coming back isn’t difficult.
  • Its Big Enough and Consumer Facing: One of the appeals of the Magnificent 7 stocks is they’re all consumer-facing. We interact with all or most of these companies, like we do with Netflix. In addition, Netflix is worth $261 billion, which is smaller than the other Magnificent 7 stocks, but if it’s nearly back to its all-time highs and a strong rally could push it to a range not far from Tesla.
  • Its Stock is Running: Netflix has had strong price appreciation recently, returning 94% in the past twelve months. Streaming has gone from a bloodbath industry where companies are losing tons of money to gain share to one where large players like Paramount and Disney are cutting losses, accepting market share, and focusing on profitability. That’s an excellent development for Netflix, which can retain its leadership position.
  • It Has Catalysts: Netflix has some key levers to pull for growth in the coming years. First, its ad tier is starting to deliver and the company can be a welcome life raft for advertisers fleeing cable television. Second, it’s pushing into live sports in a much more aggressive fashion. This creates a scenario where Netflix becomes the dominant “one-stop” shop for media consumption.

Add it all up and my bet is for Netflix to become the next stock the media lumps into the “Magnificent” label.

 

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