The “Magnificent Seven” stocks have historically been strong performers, but most have experienced declines in 2025, with some experiencing significant losses. While their decreased prices may seem attractive, not all are considered wise investments at present. Five stocks appear promising, yet two are being avoided.
Regarding the stocks being avoided, Apple Inc. (NASDAQ: AAPL) and Tesla Inc. (NASDAQ: TSLA) are not recommended for purchase at this time due to certain challenges these companies are facing. Apple has not released a groundbreaking or innovative product in recent times and has struggled to achieve substantial revenue growth over the past three years. Although it surpassed its trailing-12-month total from fall 2022 in the recent quarter, Wall Street analysts forecast only 4.6% and 8% growth in fiscal years 2025 and 2026, respectively. Furthermore, Apple carries a premium valuation compared to its peers, with only Amazon and Tesla having higher forward price-to-earnings ratios, while Microsoft’s is comparable. Consequently, Apple stocks are being avoided.
Tesla is encountering brand challenges partly attributed to CEO Elon Musk’s involvement with former President Donald Trump’s administration. Regardless of opinions on Musk’s actions, it is evident that some Tesla owners and potential buyers are displeased. These brand issues need resolution before considering investment in Tesla.
The remaining five stocks, identified as Nvidia Corp. (NASDAQ: NVDA), Microsoft Corp. (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG, GOOGL), Meta Platforms Inc. (NASDAQ: META), and Amazon.com Inc. (NASDAQ: AMZN), present potential investment opportunities given their current pricing levels.
Following a recent sell-off, these five stocks have dropped 15%-20% from their peaks, currently trading near relative valuation lows from the past three years. Of these, Alphabet stands out as the least expensive at 19 times forward earnings, based on analyst estimates. This positions Alphabet at a valuation below the S&P 500’s 20.5 forward price-to-earnings ratio. Growth rates projected to exceed market pace in the coming years make Alphabet a compelling investment.
Nvidia, though among the pricier of the five stocks, anticipates the highest growth. Wall Street analysts project Nvidia’s revenue will increase by 57% in fiscal year 2026 and 23% in the following year, significantly outpacing the S&P 500’s average growth of 10%. Additionally, Nvidia’s CEO, Jensen Huang, envisions achieving $1 trillion in data center revenue by 2028, offering substantial future potential for the company.
Microsoft and Amazon are also considered strong investments, along with Alphabet, because of their involvement in cloud computing. Cloud computing is benefiting from the AI surge, as many businesses lack the computing power to run AI models and thus rely on cloud providers. Amazon Web Services (AWS), Azure (Microsoft’s platform), and Google Cloud (Alphabet’s platform) are leading cloud providers and are expected to gain from projected market growth from $752 billion in 2024 to $2.4 trillion by 2030, which could drive these stocks to outperform the market.
Lastly, Meta Platforms is investing heavily in AI to maintain a dominant position in social media, generating substantial revenue from ads. The company is also exploring ventures within its Reality Labs division, where successful products could introduce new revenue streams. Current projections suggest a revenue increase of 15% in 2025 and 14% in 2026, positioning Meta as an attractive stock for market outperformance.
The “Magnificent Seven” stocks remain significant in the current market landscape, yet careful selection of investments is necessary. The recent market downturn presents a favorable opportunity to acquire some of these stocks at reduced prices, and there is a belief that at least some will outperform the market in the coming three to five years.