The tech giants — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — were responsible for more than half of the 23% advance in the S&P 500 index in 2024. What can happen this year, according to analysts?
The dominance of big technology companies, known as the ‘Magnificent Seven’could falter in 2025 due to the expected slowdown in its profit growth.
This was stated by Lisa Shalett, chief investment officer of Morgan Stanley’s wealth management division, in an interview with Bloomberg.
The slowdown in profit growth
The tech giants — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — were responsible for more than half of the 23% advance in the S&P 500 index in 2024. According to Bloomberg Intelligence, the combined profit growth of these companies will moderate from the 34% recorded in 2024 to the 18% projected for this year.
Shalett noted that this slowdown could surprise those who expect sustained double-digit growth rates. “The group could stop operating as a block that leads the market,” he warned.
More selective investment strategies
With this projection, investors are becoming more cautious. The ‘Magnificent Seven’ shares have come under selling pressure, with a streak of consecutive losses not seen since 2022. Shalett predicts that investors will begin to be more selective, differentiating between the companies in the group based on their exposure to risks such as the strong dollar, antitrust regulations and its ability to capitalize on artificial intelligence (AI).
“We are at a point where differences in individual growth stories will be crucial,” Shalett explained.
Recommendations from Wall Street
Shalett is not the only one to propose a more cautious approach towards big technology. Bank of America’s Savita Subramanian warned that expectations for these companies are near all-time highs, which could increase the risk of disappointment. Firms such as Goldman Sachs and Citigroup have also recommended diversifying portfolios, moving away from the technology group to seek opportunities in other sectors of the S&P 500.
Looking beyond technology
Looking ahead to 2025, the key will be to adjust expectations and look for opportunities in smaller companies and in sectors with less exposure to the AI frenzy. According to Shalett, “disappointments are likely to arise in those areas where enthusiasm has been excessive.”
Although technological growth remains a dominant force, the ‘Magnificent Seven’ era of absolute leadership could face significant challenges this year.
Source: Ambito
