By Teresa Rivas

Hopeful investors are holding their breadth.

For the past two years, it has been hard to escape the Magnificent Seven, the big tech stocks that powered so much of the recent bull run that they now account for about a third of the S&P 500, an index that is weighted by market capitalization.

Although the stocks -- Alphabet, Amazon.com, Apple, Meta Platforms, Nvidia, and Tesla -- don't really trade in lockstep, meaning the market risk they pose isn't as concentrated as it appears at first blush, investors have long been hopeful that more stocks would join in the rally. Not only would that provide support should the Mag Seven falter, but it would also make it easier to put new money to work, considering how expensive big tech has become.

Now that shift may be happening. The Roundhill Magnificent Seven exchange-traded fund is up 1.3% year to date, trailing behind the broader market. Even much maligned sectors like airlines are outpacing it.

Overall, 2025 hasn't been kind to big tech. In January, the Chinese start-up DeepSeek rattled markets after a paper was published that indicated it had produced an artificial-intelligence chatbot at a much lower cost than other AI models. Although the way investors interpreted some of the data was called into question, the news led to worries about the assumption that has buoyed stock valuations: If AI can be produced for cheap, Silicon Valley's huge capital expenditures look foolhardy, and call into question the idea that American companies are the best way to play AI.

Likewise, investors weren't wholly reassured by earnings reports from the Mag Seven as the companies continue to pour billions into research and development. People increasingly want hard evidence that the spending is leading to results. It is still tough out there for skeptics on tech stocks, but at least a few voices have argued that trimming holdings of Mag Seven shares might be warranted.

Yet despite those setbacks, the broader market hasn't had much trouble making headway. The last week of January, when the DeepSeek panic broke, the S&P 500 quickly recovered and nearly broke even. It wasn't until tariff threats tanked stocks that Friday that it sank back into the red for the five-day period.

Strong economic data and encouraging earnings results from other companies have helped propel the S&P 500 higher even as the Mag Seven lag behind.

Tuesday's market performance highlights what is happening. The S&P 500 notched its second record close of 2025, rising 0.2% to 6129.58 for a gain of 4.2% for the year.

That means that the S&P 500 reached that new all-time high "without much help from the Mag7 stocks," wrote Craig Johnson, chief market technician at Piper Sandler. Both small and mid-caps outperformed large-caps on Tuesday.

"The stock market's resilience has been impressive year-to-date as investors refuse to back down in the face of rising negative sentiment and concerns about tariff and inflation headlines," he wrote.

According to Dow Jones Market Data, there were 319 stocks in the S&P 500 that were higher year to date as of Wednesday morning. Three hundred of them were outperforming the Roundhill ETF.

Parties don't have to be exclusive. The more, the merrier.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 19, 2025 11:58 ET (16:58 GMT)

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