Magnificent Seven is passe. This group of AI stocks can replace it

Wall Street’s most powerful collection of stocks, the Magnificent Seven, is looking a tad dated.

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Make way for the Great Eight. Or maybe the Golden Dozen. Or the TenAl of GenAl.

It has been almost three years since OpenAl’s ChatGPT made artificial intelligence (AI) the centre of the global economy, and in that time, one trade has dominated the US stock market: Buy the Mag Seven. Comprised of Nvidia, Microsoft, Apple, Alphabet, Amazon.com, Meta Platforms and Tesla, this septet was seen as best positioned to deliver huge returns to investors during the biggest technological shift since the internet.

While that has largely played out, a funny thing happened on the way to global dominance. The Al trade expanded in unexpected ways and moved beyond several of the market’s favourite big tech companies.

So investment strategies based on the Magnificent Seven - which is responsible for more than half the S&P 500 Index’s 70 per cent-plus rise since the start of 2023 - are missing some of the firms that are also expected to thrive in an AI future, like Broadcom, Oracle and Palantir Technologies.

“Just because the Mag Seven won past tech cycles like mobile, the internet and e-commerce, that doesn’t mean they’ll win here,’ said Mr Chris Smith, portfolio manager of Artisan Partners’ Antero Peak Group. “The next winners will be the ones that address large and unconstrained markets through AI, becoming bigger companies in the future than the Mag Seven are today.”