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Stock Comparison: Magnificent 7 vs. 2000s Tech Bubble

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See this visualization first on the Voronoi app.

Graphic comparing Magnificent 7 stocks to 2000s tech bubble leaders

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Stock Comparison: Magnificent 7 vs. 2000s Tech Bubble

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Today’s stock market is dominated by the Magnificent Seven: Apple, Microsoft, Google, Amazon, Meta, Tesla, and Nvidia. Most of these companies have trillion dollar valuations, and have outgrown the rest of the U.S. stock market by a huge margin.

And while these companies have solidified their roles in everyday life, powering AI, cloud computing, and more, their dominance echoes the tech boom of the early 2000s, raising questions of sustainability.

To understand this issue more, we compare the Magnificent Seven (Mag 7) with seven of the top stocks from the 2000s Tech Bubble.

Data and Methodology

The figures we used to create this graphic can be found in the tables below. Data was accessed from Goldman Sach’s Global Strategy Paper (Sept. 5, 2024).

Starting with the Mag 7 (data as of Sept 2024):

Magnificent 7 (2024)% of U.S. Market CapCash as % of Market Cap24-month Fwd P/ENet Profit Margin
Microsoft6.6325.735
Apple7.31.826.527
Nvidia5.73.724.153
Amazon48.625.49
Alphabet3.9416.628
Meta2.44.219.234
Tesla1.44.355.49
Aggregate31.34.223.928

And next, the leading stocks from the 2000s tech bubble (data as of March 24, 2000)

Tech Bubble Leaders (2000)% of U.S. Market CapCash as % of Market Cap24-month Fwd P/ENet Profit Margin
Microsoft4.5353.239
Cisco Systems4.20.4101.717
Intel3.62.542.125
Oracle1.9184.615
IBM1.72.723.59
Lucent1.60.937.99
Nortel Networks1.51.186.4-1
Aggregate191.75216

From this comparison, we can see that the Mag 7 represents over 30% of the U.S. market, which is significantly more than the 19% held by the seven leading tech stocks in the 2000s.

Such a high concentration among very few companies could be seen as a source of risk, though it appears that the Mag 7 stocks are relatively stronger.

Compared to the 2000s group, they have higher profit margins, larger cash reserves, and are more attractively priced (as evidenced by their lower forward P/E ratios).

A counterpoint to these metrics, however, is the Mag 7’s use of stock buybacks (with the exception of Tesla and Amazon). Stock buybacks inflate earnings per share (EPS) because they reduce the number of shares outstanding (company earnings are divided by a smaller number).

Apple is the biggest offender in this regard, buying back $83 billion in shares between June 2023 and June 2024. This was equivalent to 2.8% of its market cap at the time.

Learn More on the Voronoi App

If you enjoy learning about markets, check out our Sept 2024 update of major asset class returns on Voronoi, the new app from Visual Capitalist.

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