The Magnificent Seven Powers S&P 500 higher in Second Week: Is 2024 Another Blockbuster Year for AI?

SPDR S&P 500 ETF ( $SPDR S&P 500 ETF Trust(SPY)$ ) rebounded 1.87% in the second week of Jan 2024 whereas the Magnificent Seven is responsible for 70% of the S&P 500's gains during the same period.

The Magnificent Seven also drove 105% of the S&P 500's total returns year-to-date. S&P 500 returned 0.34% thus far this year.

The substantial contribution of the Magnificent Seven to the S&P 500's gains indicates that 2024 could be another significant year for AI.

While owning these seven stocks appears to be the market's "most crowded" trade due to their notable share price rally in 2023, they remain poised to benefit the most from the ongoing AI craze.

We think that that only a few large-cap stocks are participating in the celebration of AI technology, especially if borrowing costs remain higher for longer than expected, putting small-cap stocks in a weaker position to develop AI.

We maintain a positive outlook on all Magnificent Seven stocks except for Meta Platforms.

We remain neutral on Meta Platforms due to the Metaverse-related costs, despite improved monetization in Reels and FB Shops and a positive outlook on WhatsApp's monetization.

Microsoft ( $Microsoft(MSFT)$ ) surpassed Apple ( $Apple(AAPL)$ ) in market cap and may maintain its position as the most valuable company for an extended period as Apple's iPhone sales slow.

Nvidia (NVDA) and Microsoft may experience a surge in share price this year, given their compelling AI story compared to other Magnificent Seven stocks.

We reckon that investing in Magnificent Seven stocks remains the better way to ride on the AI craze.

The Invesco QQQ ETF allocates approximately 39% of its assets to Magnificent Seven stocks, while the SPDR S&P 500 ETF invests only 28%. Thus, other than owning the individual stocks, the QQQ ETF may be an attractive option.

Roundhill's Magnificent Seven ETF ( $Roundhill Magnificent Seven ETF(MAGS)$ ) offers equal weight exposure to the Magnificent Seven stocks. While it seems like a good way to own Magnificent Seven stocks on paper, its low AUM of USD 49 million and a 90-day average aggregate volume at 45K shares hinder our interest.