A label, not a sector
The name became popular in 2023 as a way to describe the handful of giant companies driving the US stock market. Nobody maintains an official list, and the group people talk about has changed before: an earlier nickname, FAANG, had a different membership.
What they share is size and profitability, not a line of business. Lumping them together hides how different they are.
You may already own them
Because tracker funds weight companies by size, these seven are the largest holdings of almost every US and global tracker. Together they have made up a substantial share of the S&P 500 in recent years.
Buying them again on top of a tracker does not add variety. It turns up the same bet.
They do not always move together
In strong years the group has risen together, which is how it got its name. But their results depend on different things: advertising budgets, cloud spending, phone sales, chip orders, car prices.
There have been years when some of the seven rose sharply while others fell. And in 2022 all of them fell, several by half or more from their previous highs.
Equal amounts or by size
Weighting by size puts most of the money in the two or three largest. Equal weighting puts a seventh in each, which gives the smaller members more influence.
Neither is right. They are different bets, and it is worth knowing which one a fund is making.
Seven companies, seven businesses
Apple
Sells phones, computers and wearables, plus services such as its app store.
Main business: Devices and services
Microsoft
Sells business software and rents out cloud computing.
Main business: Software and cloud
Alphabet (Google)
Earns mainly from adverts on search and YouTube, with a growing cloud business.
Main business: Adverts and cloud
Amazon
Runs the largest online shop in the West and the largest cloud platform.
Main business: Shopping and cloud
Meta Platforms
Earns almost entirely from adverts on Facebook, Instagram and WhatsApp.
Main business: Social media adverts
Nvidia
Designs the chips most AI systems are trained on.
Main business: AI chips
Tesla
Makes electric cars and batteries.
Main business: Electric vehicles and energy
Companies are listed to show what each category means. They are not recommendations, and the list is not complete.
Three ways to invest
There is no single right route. Many people combine them, and plenty decide a broad global fund is all they need.
- 1
Buy individual shares
Pick one or more big technology companies and buy their shares through a broker or investing app.
- Good for
- Simple to understand. You own exactly what you chose.
- Watch out for
- If you only hold a few companies, one bad result can do real damage. Picking winners is hard, even for professionals.
- 2
Buy a ready-made fund
A fund (often an ETF) holds dozens of companies in one purchase. Examples include the Roundhill Magnificent Seven ETF (MAGS) in the US. Broader funds built around large technology companies include the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100, and the Invesco EQQQ Nasdaq-100 UCITS ETF (EQQQ) in the UK and Europe.
- Good for
- Instant spread across many companies, with very little effort.
- Watch out for
- You get what the fund provider chose, including companies you may not want. Themed funds usually charge more than broad trackers, so check the yearly fee and the top ten holdings. Which funds you can buy depends on where you live.
- 3
Build your own portfolio
Choose your own mix of companies and how much of each, then buy them through your broker. This is what Arithmos helps with: describe the mix in a sentence and it builds and tests one for you to consider.
- Good for
- You decide exactly what is in and what is out, and you can see the reason for every company.
- Watch out for
- More to look after than a fund. Buying many separate shares can cost more in dealing fees, and a tested result is a simulation, not a promise.
What $100 would have done
To make this concrete, here is a real portfolio from this area that anyone can open on Arithmos, and what $100 put into it would be worth. It is one example, shown as it is, whether it went up or down.
If you’d put $100.00 into this portfolio of 7 companies…
The risks
- Concentration. Seven companies is a very small number, and they are all large US technology businesses.
- High expectations. Their prices assume strong growth for years. Good results that fall short of that can still mean falling shares.
- Regulation. Competition authorities in the US and Europe have brought cases against several of them.
- Overlap. If you hold a tracker fund you already have significant exposure.
- Sharp falls. Large, profitable companies can still lose half their value, as several of these did in 2022.
Try it yourself
The quickest way to understand a portfolio is to look at one. Here is how to turn this guide into something you can inspect.
- 1
Start from the idea
The button below opens the builder with this guide's idea already typed in. Change any part of it: the number of companies, the countries, the limit per company.
- 2
Read the reason for every company
You get a list of companies, how much of each, and a plain-English reason for each pick. If one looks wrong to you, you can ask for it to be changed.
- 3
Look at the bad years, not just the good ones
The portfolio is replayed against real past prices. Check the biggest fall along the way, and ask yourself whether you could have sat through it.
- 4
Decide for yourself
If you want to act on it, you buy the shares yourself through your own broker. Arithmos never holds your money or places trades.
“The seven biggest US technology companies, the same amount in each.”
Browsing portfolios other people have published is free. See pricing for what building your own includes. A tested result is a simulation using past prices. It is not a forecast and not a recommendation.
Common questions
Which companies are the Magnificent Seven?
Apple, Microsoft, Alphabet (Google's parent), Amazon, Meta Platforms, Nvidia and Tesla. It is an informal nickname, so the list is not fixed.
Is there a Magnificent Seven fund?
Yes, a few funds hold just these companies, and many broader technology funds are dominated by them. Check the top ten holdings and the yearly fee of any fund you consider.
Do I already own these if I have an S&P 500 fund?
Yes. They are among its largest holdings, and together they account for a substantial part of the fund.
