Investors have switched their approach to the so-called ‘Magnificent Seven’ tech stocks as they struggle to keep pace with market, according to one analyst.
Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla, were all popular in 2023 but Chris Beauchamp, chief market analyst at IG Group said shifting investor focus has led to a change in performance among the seven stocks.
He warned the days of speculative investing were waning and stressed the importance of looking at the strengths of individual companies.
He said: “The recent shift in investor focus has resulted in a varied performance among these tech behemoths.”
While Microsoft, Amazon, Meta, and Nvidia have continued to outperform the wider stock market, Alphabet has struggled to keep pace, said Beauchamp.
The analyst said this could be down to concerns over advertising revenue growth.
Elsewhere in the group Tesla and Apple have also dropped.
Beauchamp added: “More notably, Tesla and Apple, two companies that have been investor favourites for much of the last decade, have become the largest drags on the index.
“Apple's weaker sales in China and Tesla's warning about slowing growth have raised red flags for investors, prompting a re-evaluation of their previously unwavering support for these stocks.”
He added the market has started to look at the individual merits of each company rather than “treating them as a monolithic entity”.
Beauchamp said it is important for investors to look at factors such as strong sales, the ability to adapt to market changes and the announcement of dividends.
Recently, investor confidence for Meta was kept high with the company's pivot to virtual reality and strong advertising revenue, while Microsoft's dividends and growth in its cloud business were positive.
However, Apple's reliance on China for sales and manufacturing made it vulnerable to geopolitical tensions and Tesla issued a warning about slowing growth.
"It underscores the importance of evaluating companies based on their specific strengths, weaknesses, and financial results," added Beauchamp.
"The days of speculative investment based on potential alone are waning, with investors demanding tangible results and clear paths to profitability.
tara.o'connor@ft.com
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