The US Magnificent Seven stocks of Apple, Nvidia, Meta Platforms, Microsoft, Telsa, Alphabet, and Amazon have powered the remarkable surge in the S&P 500 Index (SP: .INX) in recent years.

As this chart shows, their impact on the benchmark US index has been significant. Each company has delivered turbocharged earnings and enjoyed share price surges along the way.

But JP Morgan Global Market Strategist Ian Hui says there are early signs of investors diversifying away from the Magnificent Seven.

Why are some investors moving away from the Mag Seven?

Investors are concerned that these companies cannot keep growing their earnings at the same pace, and their share prices may correct at some point following such massive growth.

The Mag 7's stock prices have grown so much in recent years that the companies now make up about a third of the entire S&P 500 Index, which incorporates 500 businesses.

Hui says:

The contribution of the seven mega-cap tech-related companies to S&P 500 earnings per share (EPS) growth is decreasing, and their earnings growth rate is slowing, while it is accelerating for the rest of the index.

Warren Buffett sells down Apple

Last year, legendary US investor Warren Buffett sold 600 million shares in Magnificent Seven stock, Apple.

We don't know what motivated the sell-off, and Apple reportedly remains the largest holding in Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) portfolio.

My US Fool colleague Adam Levy reported that Buffett bought some smaller companies last year.

Levy explained that Buffett's 2024 trades implied he might see some stocks as overpriced and that it was time to take some profit off the table to buy smaller companies offering better value.

Perhaps some other experts feel the same way.

We've noticed that several ASX exchange-traded funds (ETFs) that are not market capitalisation-weighted do not own all Magnificent Seven stocks.

Instead of tracking the market-cap-weighted S&P 500 or Nasdaq Composite Index (NASDAQ: .IXIC), in which the Mag 7 are dominant, these popular ASX ETFs follow quality indices based on metrics such as high return on equity (ROE), low debt, earnings stability, and wide moats.

So, it's noteworthy that these indices managers have judged that some Magnificent Seven stocks do not currently make the grade for inclusion.

Examples of ASX ETFs excluding some of the Magnificent Seven

The Betashares Global Quality Leaders ETF (ASX: QLTY) is invested in 150 companies. It holds Meta Platforms, Alphabet, Microsoft, and Nvidia, but not Tesla, Amazon, or Apple.

The VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) is invested in 51 companies. It holds Alphabet, Amazon, and Microsoft but not Meta Platforms, Nvidia, Apple, or Tesla.

The VanEck MSCI International Quality ETF (ASX: QUAL) is invested in 300 companies. It holds Alphabet, Microsoft, Meta Platforms, Nvidia, and Apple but not Tesla or Amazon.

Why this fundie doesn't own 2 of the Mag Seven stocks

Nick Griffin, chief investment officer at Munro Partners, recently provided some insight into why fund managers are excluding some of the Magnificent Seven stocks these days.

On ABC's The Business program, Griffin said Munro Partners' main portfolio had a large exposure to the Magnificent Seven, at about 25%, but it did not own Telsa or Apple.

He explained why:

… so Apple we think is somewhat ex-growth. We don't think they're selling any more iPhones every year from here and most of the growth is coming from the services business and the services business is, quite frankly, a bit egregious in what it takes and we're not sure that's sustainable.

We like [Tesla] a lot, but the valuation, you know, makes it hard to get the maths to work. So, even though the earnings may grow from here, the multiple may come down and so the share price might not actually move that much and that's because a lot of people are already pricing in a lot of the good news at Tesla and we think they've probably priced in too much.