Investment Strategies

Question: What are the Magnificent Seven stocks?

Answer: The Magnificent Seven stocks (Amazon, Apple, Alphabet, Nvidia, Meta, Microsoft and Tesla) have indeed seemed to be in an investment universe of their own. In 2023, the tech heavy “Seven” stocks returned 75.71% which was more than triple the return of the S&P 500’s 24.23%.¹  However, as the old saying goes – “the only thing constant is change”.

In the past several weeks, the future profitability of AI (artificial intelligence) has been questioned by many analysts from Goldman Sachs, Moody’s, and Barclays, etc. The massive upfront costs of AI raise doubts about the amount and time lag of future profits.²

The seven stocks were named after the iconic western movie The Magnificent Seven. It may be worth remembering that four of the seven main characters died in the movie as well as dozens of other lesser actors.³   The stocks of many companies in the business world have had similar results over the years.

For example, in the late 1990s, the Palm Pilot handheld device was the big “must have,” until it was bumped aside by Blackberry, who was later bumped aside by iPhone. Is this an isolated tech trend?

No! Music was once stored on vinyl records. Then came 8-tracks, followed by cassettes, followed by CDs, followed by streaming companies such as Spotify.

There is a famous quote attributed to Charles H. Duell, the Commissioner of the U.S. patent office in 1899, “Everything that can be invented has been invented.”⁴  Now, 125 years later, that statement seems absurd, because nearly all the things we know and use today were invented since then. Yet the profitability of each new technological advance is not the same or easily predictable.

¹ https://www.mellon.com/insights/insights-articles/a-closer-look-at-magnificent-seven-stocks.html

² https://www.theatlantic.com/technology/archive/2024/07/ai-companies-unprofitable/679278/

³ https://www.quora.com/How-many-died-in-the-Magnificent-Seven#:~:text=If%20you%20are%20referring%20to,seven%20die%20in%20each%20movie.

⁴ https://patentlyo.com/patent/2011/01/tracing-the-quote-everything-that-can-be-invented-has-been-invented.html

For more information about Aileron Investment Advisors visit www.investwithaia.com.

Investing involves risk, including the potential loss of principal. This is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Securities and advisory services are offered through Madison Avenue Securities, LLC (“MAS”), a registered investment adviser & member FINRA/SIPC.  MAS and Aileron Investment Advisors are not affiliated companies.  07/29