Key Points
Several of the companies in the "Magnificent Seven" have fully retained their "magnificence" in the three years since the group was defined.
Most of Meta Platforms' businesses have parallels within SpaceX.
When Bank of America chief investment strategist Michael Hartnett pinned the "Magnificent Seven" name on a group of megacap companies back in 2023, those giants were in fact the most dominant tech stocks in the market. In order of their market caps today, they are:
- Nvidia (NASDAQ: NVDA)
- Apple (NASDAQ: AAPL)
- Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)
- Microsoft (NASDAQ: MSFT)
- Amazon (NASDAQ: AMZN)
- Meta Platforms (NASDAQ: META)
- Tesla (NASDAQ: TSLA)
These seven companies have remained dominant, but other tech players have risen into powerful positions since this grouping was formulated.
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One that many investors are curious about is Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX. SpaceX went public in June, and is already making waves with its rapidly growing businesses and exciting technology.
If a Wall Street guru like Hartnett was looking to pick a fresh seven-stock group of tech powerhouses that could accurately be described as leading Wall Street now, which current Magnificent Seven stock might get kicked out to make room for SpaceX? The answer may surprise you.
Image source: Getty Images.
Here are the six that would stay
The knee-jerk reaction would be to kick Tesla out, as it has struggled in recent years due to falling margins and inconsistent sales volumes. It's also the smallest by market cap now. However, I think Tesla is still an important member of the Magnificent Seven, as it gives the group exposure to a different consumer segment. If Tesla can fully deploy full self-driving capabilities for its electric vehicles, it will contribute a unique spin to the Magnificent Seven, making it worthy of remaining in the group.
I'd also keep Apple, Alphabet, Amazon, and Microsoft. These four companies are staples in the group and give it exposure to both consumer and business spending trends.
Nvidia, as the largest company in the world, is the closest stock in the group to an AI pure-play pick, and is still achieving phenomenal growth.
That leaves just one stock in position to get the boot: Meta Platforms.
SpaceX and Meta Platforms have a business in common
Meta Platforms and SpaceX actually have a fair bit of business model overlap. Meta Platforms' operations are mostly centered around its social media platforms and the advertising revenue it derives from them. Meta is also sinking billions of dollars into its AI capabilities, looking to release consumer products like glasses that can take AI from the computer screen to the real world. While its AI endeavors are exciting, Meta really doesn't have anything to show for them right now.
SpaceX is doing a lot of the same things. It has a social media platform, X (formerly known as Twitter), thanks to xAI's acquisition of X and then SpaceX's acquisition of xAI.
xAI also has the Grok large language model, which competes against some of Meta's models. This places Meta in direct competition with SpaceX, but there are some other businesses that SpaceX brings to the table that aren't currently represented through the tech companies in the Magnificent Seven.
It has a satellite internet connectivity business thanks to its Starlink service, and also has a rocket launching unit. None of these are currently represented in the Magnificent Seven, but both are exciting parts of society today that could be even bigger in the future. If SpaceX can build a viable space transportation business, it would easily be as important a business as any in the Magnificent Seven, and because it covers Meta's bases, it would be a solid replacement.
If Meta can deliver a solid AI glasses business with a thriving subscription model and a must-have product, then I think Meta could make a case to remain included in a "new" Magnificent Seven over Apple, as the iPhone maker's technology launches have been fairly stagnant over the past few years. We'll see how the Magnificent Seven progresses over the next few years. Still, if SpaceX continues on its current trajectory, then there may be a case to define a new group of tech sector leaders that includes it by the end of the decade.
Keithen Drury has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.