Magnificent Seven – take a closer look

• BNP Paribas
  

What a great movie scene. Yul Brunner and Steve McQueen, alias Chris and Vin, ride off through the vastness of the Mexican steppe. The battle is won, even though their friends had to pay for it with their lives. The “Magnificent Seven”, filmed in 1960, was the template and inspiration for an entire genre, the western – and gave its name to the Magnificent Seven on the stock exchange. Michael Hartnett from Bank of America is said to have used the title for the first time in 2023 to emphasize the outstanding position of seven large technology companies on Wall Street; in alphabetical order, these are Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.

But as coherent and meaningful as the name “Magnificent Seven” may sound, in the end there are seven individual companies that don’t really have much to do with each other, and their selection into the “Magnificent Seven” group was probably more of a coincidence. If the movie at the time had been called “Magnificent Eight”, there would certainly be an eighth company at the start now, perhaps Broadcom or Palantir both of which are also very successful, both in real business life and on the stock market.

What speaks for the Magnificent Seven

But none of this changes the fact that the Magnificent Seven are a success story, even in the current selection. It is therefore not surprising that the Magnificent Seven shares have recovered more strongly in recent months from their correction lows in the first half of 2025. It seems that the uncertainties regarding the further development of the tech scene in the US that still dominated at the beginning of the year – caused by the introduction of trade tariffs by US President Donald Trump, among other things – may not have disappeared completely, but they have receded into the background. People are once again looking at the fundamentals, at growth, profits and sales, and these speak in favor of the Magnificent Seven.

The figures for the second quarter of 2025 were certainly a “key event”, with some of the Magnificent Seven delivering excellent results. Microsoft, for example, reported quarterly revenue of over 76 billion dollars, an increase of 18% compared to the same quarter last year. The revenue growth of almost 40 percent in the promising cloud business is particularly striking.

The Magnificent Seven’s results are therefore being driven in particular by its good positioning in future technologies such as the cloud and artificial intelligence. The share price recovery in recent weeks is not built on sand, but is based on facts. This may lead us to expect further share price gains.

Magnificent Seven – what to look out for

Nevertheless, it must be noted that the Magnificent Seven are highly valued on the stock market. Microsoft has a price/earnings ratio of over 30 for the coming year, which is not very meaningful in isolation but is nevertheless useful for an initial assessment. The shares are therefore not cheap. They don’t have to be, as long as they deliver quality, i.e. good figures, but the outlook must not become gloomy. The example of Tesla shows what could happen if things don’t go so well. Because sales at the e-car manufacturer are not running smoothly and the competition is not sleeping, Tesla shares did not simply correct in the first half of the year like other stocks from the Magnificent Seven, they halved. Although they have recently been able to make gains again, after such a slump investors should ask themselves what the future holds for Tesla?

It follows that the Magnificent Seven are a success story, yes, but it is also clear that they are not a “movie classic” for eternity. Not every company in the Magnificent Seven group “has” to deliver good figures in the long term. So it’s worth taking a closer look.