By Jacob Sonenshine
The Magnificent Seven stocks have stumbled. Finally, long-term investors who have been looking to buy have an opportunity.
Each of these stocks -- Nvidia, Tesla, Apple, Meta Platforms, Alphabet, Amazon.com, and Microsoft -- is down, but many indicators show that dip-buyers should come in soon.
The weakness emanates from a few factors. Nvidia has underperformed the rest of the chip universe since mid May, partly because other chip makers are selling general purpose artificial intelligence chips for companies' data centers, threatening Nvidia's market share. Apple is trying to prove it can maintain respectable sales growth (maybe its new AI strategy can help).
Alphabet, Meta Platforms, Amazon, and Microsoft took hits as Alphabet issued stock early this month, stoking concern that its Big Tech services peers might do the same. Microsoft stock has also seen some pressure from a general wave of selling in software, as investors take profits in recent winners. For all four, the market wants to see returns on the growing capital expenditures in data centers.
The bigger picture shows the Roundhill Magnificent Seven Exchange-Traded Fund is down about 9% from its record high in mid May.
The positive side: several indicators show the selling in Big Tech is likely to abate soon.
Jefferies data show their trading clients have executed roughly $6 billion of net selling of Mag 7 shares in the past 20 days. That's the second worst 20-day stretch of selling in at least the last two years; the worst was in March of this year -- close to $8 billion of net sales -- in the early weeks of the Iran war. Somewhere near the $6 billion mark is the worst point, meaning this is the time buyers start to come in to balance out the trading.
That's part of a picture in which the stocks have begun to stabilize at key levels. The Mag 7 ETF, at just over $64, is basically flat in the past week-and-a-half, and has consistently bounced in the mid-$60s, where buyers have repeatedly come in since April.
So maybe much of the concern around these companies is priced in. Trivariate Research's Adam Parker wrote that in his conversations with institutional investors, he found that some are "seeing companies like Google, Meta, and Amazon as attractively positioned."
They're certainly attractively valued.
Meta Platforms trades at about 16 times earnings that analysts forecast for the coming 12 months, below the S&P 500's roughly 21 times. Meta usually trades at a premium to the index, as it's often seen as a company that can reliably boost profits faster than the broader market.
It has the potential to continue that growth. As it uses AI to better align users' interests with content, the company is still attracting more advertising dollars. Analysts expect just over 17% annual sales growth to almost $406 billion by 2029, according to FactSet.
It feels like the sky is the limit. The company almost never misses revenue expectations, and has beaten top-line estimates by 3.4% on average in the past four quarters.
Its earnings per share have the potential to grow close to in-line with sales. Don't forget, the company has focused on operating cost discipline in the last few years and has repurchased shares most quarters, something that becomes easier to do with a lower stock valuation and would offset shareholder ownership dilution from any share issuance to come.
Alphabet and Amazon are in similar boats. They trade for about 24 and 25 times earnings, respectively, slim premiums versus the S&P 500, given the more than 7 point premium Alphabet can often trade at. Amazon has sometimes traded at roughly double the index's multiple in the past two years.
They're further entrenching themselves with their AI cloud customers, and growing their ad businesses, while Amazon also continues to see more mild growth of e-commerce sales. Analysts expect both to sustain sales growth in the teens for the coming three years, which would outpace aggregate S&P 500 revenue growth. Alphabet has more cash than debt, which, combined with the fact that it's still producing free cash flow even with its investments, gives it plenty of capacity to buy back stock and grow EPS robustly.
Microsoft trades at 19 times earnings, but often trades at a premium to the market. It's expected to see 19% annual EPS growth for the coming three years, a trajectory that's far less threatened by OpenAI than other software companies.
Microsoft, a recent stock pick of ours, is supplying OpenAI with vital compute capacity. It even owns about 27% of the soon-to-be-public AI giant.
It and the other stocks mentioned could see a major catalyst for gains with better-than-expected earnings -- and any accompanying management commentary that indicates capex won't grow any faster than the market's current expectation.
Long-term investors should just bite the bullet and buy these.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 22, 2026 13:55 ET (17:55 GMT)
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