2023 was certainly an incredible year for the Magnificent 7 (MAG 7) stocks of Amazon, Microsoft, Nvidia, Meta, Alphabet, Apple, and Tesla, with an average share price increase of 71%. Thanks to this enormous growth, the MAG7 now contributes to 29% of the S&P 500’s market cap. However, the start of 2024 has created some problems for these innovative tech companies, ranging from regulatory challenges to unexciting performances. This raises the question of whether these companies still have fuel left in the tank or whether they are running on fumes.
Nvidia had the most impressive return out of the Mag 7, with its share price up 239% in 2023. Despite concerns that the stock was expensive back then, it has still managed to increase by 27% since the start of the year. Nvidia remains in a prime position for robust growth in 2024, as the AI craze continues to take over and increase demand for their H100 GPUs. Sales forecasts are incredibly strong, with the anticipated shipment of 2 million H100 units in 2024 potentially generating a revenue of $59 billion alone. This is still ignoring the other segments of their business, including producing components for high-end gaming devices. Thus, Nvidia is an attractive investment for 2024, perfectly poised to surpass Wall Street’s growth forecasts which could stimulate further share-price momentum.
Next up is Amazon, which delivered returns of 80% throughout 2023. Though Amazon has faced challenges in the new year, with its $1.45 billion deal with iRobot being scrapped due to EU regulatory challenges, its stock is still up 4.65% in the past month. Amazon remains a robust stock in the MAG 7 with growing demand for its web services as the AI race accelerates. With its strong market position and increasing optimism as economic conditions improve, many analysts still believe it has growth left in it.
Meta has also been on a rally since the start of 2024, with the stock up 13% in the past month following growth of 194% in 2023. Zuckerberg has continued the year of efficiency, which saw 20,000 jobs cut in 2023, to create a leaner and more profitable social media giant. Meta has also increased its investment into AI, with Zuckerberg revealing the company’s plan to obtain 350,000 H100 GPUs from Nvidia as well as “almost 600,000 H100 equivalents of compute if you include other GPUs”. Because of this, Meta will remain a strong stock in 2024 as the business focuses on securing profitable growth and increasing returns from its advertising customers.
Continuing the trend of positive starts to 2024, Microsoft, whose stock price grew 57% in 2023, has seen shares increase by 8.66% in January. Despite the company’s quarterly results failing to convince investors that sales will increase in line with the massive capital expenditure required in the AI arms race, Microsoft still managed to achieve a market cap of $3 trillion as revenues from their cloud services grew 20% in the final quarter of 2023. Furthermore, Microsoft Azure now boasts 35,000 customers and has seen an increase in billion-dollar-plus commitments. As Microsoft rides the wave of generative AI, it will continue to be a good stock in 2024.
Like Microsoft, Alphabet published its Q4 2023 report in January, though it was met with a more punishing 5% drop in the share price value due to missing forecasts for advertising revenue growth. Despite this, Alphabet’s stock saw gains of 58% in 2023 and 8.6% in the past month. Alphabet remains in a strong position in 2024, with the debut of their new Gemini AI establishing its place in the field of AI. Additionally, the improving macroeconomic outlook will likely increase the amount that firms will spend on advertising, which makes up 80% of Alphabet’s revenue.
In contrast to the positive start to the year boasted by 5 of the MAG 7, Apple has seen its share price decline 2.33% in January. Apple is facing growing challenges, with fears over drops in iPhone revenues as iPhone sales in China fell 30% in the first week of 2024. However, it isn’t all doom and gloom for Apple as they continue to focus on adding a large language model AI to their next generation of smartphones which Bank of America thinks will boost their demand in the next upgrade cycle. Though Apple likely isn’t a strong buy for 2024, it still remains an incredibly well-run business with a strong MOAT and customer loyalty.
The final stock of the MAG 7, Tesla, faced an even bleaker start to 2024 than Apple. Though the share price skyrocketed 108% last year, January has seen a retreat on some of those gains, with a price decline of 22.9%. This has emerged due to warnings of reduced EV sales caused by ramping competition and lower demand. Tesla has also seen some weakening in its profit margins as it conducts price cuts on its expensive models and increases spending on R&D and Cyber Truck production. Shares were also hit by the voiding of Elon Musk’s $55 billion remuneration package by a US judge who felt that Musk had dominated the proceedings. The trend for Tesla in 2024 is less clear-cut than the other stocks within the MAG 7. With a beta of 2.31, Tesla is a highly volatile stock whose value is not only subject to its financials but also the actions of Elon Musk (whether they are related to the business or not). Only time will tell if Tesla succumbs to the bear market or rebounds thanks to economic growth boosting EV sales.
So, there it is. A full roundup of the MAG7 stocks and their varied starts to 2024. Though most of the stocks have started the year strong, some remain uncertain picks for 2024. It will be interesting to see how these tech stocks fluctuate as 2024 develops. Will they ride the highs of the AI train like in 2023, or will they come crashing back down?