December’s market rally has been fueled by several members of the “Magnificent Seven” tech stocks, with Tesla (TSLA), Alphabet (GOOGL), Amazon (AMZN), and Apple (AAPL) hitting record highs. Despite a down day for major indexes on Tuesday, the Roundhill Magnificent Seven ETF (MAGS) managed to reach a new peak. Yahoo Finance notes that these tech giants have become the safe bet for investors during periods of economic and market uncertainty.
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Market strategists, including Citi’s Scott Chronert, argue that with fewer expected interest rate cuts in 2025—currently down to two from the four projected in September—investors see the Magnificent Seven as safer bets. In addition, Charles Schwab’s Kevin Gordon told Yahoo Finance that their strong cash flows and minimal exposure to borrowing costs make them resilient in an environment where rates remain elevated for longer.
Indeed, large-cap tech stocks’ ability to thrive despite rate uncertainty positions them as both defensive and growth plays. Chronert even used the term “growth as defensive” to describe the Magnificent Seven stocks. It also helps that these companies have good near-term visibility of up to two years out, which is definitely what investors need when most other factors paint an uncertain picture.
Not Enough to Simply Meet Expectations
However, Chronert did note that the problem with these stocks may become what investors think will happen beyond the two years. In fact, he believes the market is starting to price in the belief that large-cap tech will continue delivering solid results past this timeframe. As a result, he cautioned that it would not be enough for the Magnificent Seven companies to simply meet expectations.
Which Magnificent Seven Stocks Is the Best Buy?
Overall, analysts expect the most upside potential from Nvidia stock (NVDA) thanks to its price target of $177.14 per share, which implies gains of more than 35% from current levels. On the other hand, they expect the least from Tesla, as its price target of $287.10 per share implies a decline of more than 40%
