Magnificent 7 earnings are heating up as Apple, Microsoft, Meta and Tesla report, putting AI strategy, valuations and Mag-7 ETFs in the spotlight.
The Magnificent Seven have been running out of fuel well before we rang in the new year.
The S&P 500 is the most well-known benchmark, and buying an ETF focused on this index could have yielded good long-term returns.
I am upgrading Roundhill Magnificent Seven ETF (MAGS) to a "Buy," citing robust EPS growth trends into 2026. MAGS offers equal-weight exposure to the Magnificent Seven, with strong recent momentum and improved fundamentals despite recent volatility. The Mag 7 group is forecasted to deliver 23% EPS growth in 2026, outpacing the S&P 500 ex-Mag 7 by 12 percentage points.
Mega-cap growth stocks have been some of the top performers in the stock market. The Roundhill Magnificent Seven ETF (BATS:MAGS) contains the seven largest publicly traded corporations, and that fund has regularly outperformed the S&P 500 since its inception.
The Magnificent Seven—the tech-focused firms among the largest and most influential companies in the world—absolutely dominate the broader market, accounting for a full one-third of the S&P 500. The Roundhill Magnificent Seven ETF BATS: MAGS provides equal-weight exposure to these seven stocks and has returned nearly 20% year-to-date (YTD).
Roundhill Magnificent Seven ETF trades at a true 77x earnings multiple when accounting for capex and stock-based compensation. Capital expenditure has now risen to 14% of total sales for the Magnificent 7 stocks, compared to depreciation and amortization expenses of just 6.5%. The free cash flow yield on these stocks is likely to be less than 1% over the long term, meaning that almost all returns must come from growth.
Mag 7 earnings came in at mixed but AI momentum strong, which could prove to be a bullish setup for ETFs like MAGS, FNGS, MGK & XLG.
MAGS remains a great Buy after a moderate dip, thanks to the holdings' robust AI monetization cadence across the infrastructure and SaaS layers during the multi-year cloud super cycle. This is significantly aided by the numerous growth tailwinds into the upcoming Q3'25 earnings season, with companies such as TSLA and NVDA likely to report double beat performances. Those in the cloud/ advertising segments may also outperform, attributed to the growing compute demand and improved ad targeting/ higher user engagement.
Last year's Magnificent 7 tech leaders are rolling again.
Big tech stocks slid throughout most of the week amid a risk-off pivot, but some analysts say there are several structural reasons to remain bullish on tech giants.
MAGS, FNGS and TOPT ETFs are in focus as Microsoft, Meta, Apple and Amazon prepare to report key Q2 earnings this week.