Ravenous demand for Magnificent Six stocks continues

Bigtech stocks, and notably six of the ‘Magnificent Seven’, are being gobbled up by hungry investors in record numbers, with the market value of US tech stocks, overall, growing significantly more than all other industries.

Microsoft, the top gainer, was reported to have added $1.11 trillion to its market cap in the year to 31 January 2024, reaching a total market value of $2.9 trillion, figures from investment research company GlobalData have revealed.

Representing a nearly 60% increase on the previous year, Microsoft’s fortunes appear to have turned a corner, reversing the preceding year’s 29% decline.

According to Murthy Grandhi, company profiles analyst at GlobalData, this turnaround was largely attributed to the “burgeoning prominence” of artificial intelligence (AI) in Microsoft’s product line-up and innovation priorities, as well as continued growth in its corporate cloud offering.

“Strategic investments by Microsoft in technologies such as ChatGPT and Copilot notably enhanced productivity, drawing in millions of users and fuelling revenue growth,” he said.

“[Microsoft’s] Azure Cloud emerged as a significant beneficiary, surpassing competitors such as AWS and Google Cloud.”

Analysts remain sanguine over Microsoft’s growth, foreseeing, Grandhi said, a “continued surge with projections suggesting that AI alone could contribute over $100 billion in revenue for Microsoft by 2027, capitalising on its expansive user base.”

Chip maker NVIDIA also saw an impressive $519 billion jump in market cap over the same period, reaching $1.52 trillion in value.

Six of the ‘Magnificent Seven’ stocks – Microsoft, NVIDIA, Meta, Apple, Amazon, Alphabet – took out the lead six places (in the preceding order) of GlobalData’s top equities market value gainers list, with Tesla the only one of the M7 to miss out on a top 25 berth.

Collectively, the market cap of the M6 grew by $4.36 trillion – representing two-thirds of the total market value growth of the top 25 gainers.

US chip and software marker Broadcom came in seventh, growing $308 billion, with tech and pharma giants rounding out the top 10 – Eli Lilly and Co (up $286 billion), Advanced Micro Devices (up $150 billion) and Denmark’s Novo Nordisk (up $144.9 billion).

Among the biggest losers was Finnish financial services company Nordea Bank, which saw a staggering $438.8 billion drop in market value to reach $40.2 billion.

GlobalData attributed the fall to lower-than-expected profits, totalling EUR1.42 billion compared to the anticipated EUR1.61 billion.

“This was influenced by a 3% decrease in net fee and commission income and a 15% drop in net insurance results year-on-year. Additionally, regulatory fees surged by 25% due to the increased Swedish bank tax.”

“The absence of a new share buyback program and heightened risk exposure further disappointed investors. Notably, the bank’s market capitalization plummeted by over 90% during the review period,” GlobalData said.

Within the financial services sector, Berkshire Hathaway, JPMorgan & Chase, Visa, and Mastercard registered market value growth ranging from 16% to 23%.

The non-US financial services sector as well as a broad range of Chinese stocks saw significant market cap downturns, attributed to both an uneven post-Covid-19 economic recoveries and geopolitical tensions.

KE Holdings, a China-based construction firm, bore a considerable 90.5% decline in market value, GlobalData reported, primarily due to challenges in the country’s real estate sector.

Chinese tech giant Tencent and retailing powerhouse Alibaba also saw declines of $139.3 billion and $108 billion, respectively. While a small niggle for Tencent, which maintains a current market cap of $2.5 trillion, for Alibaba the drop is more significant, it represents a one-third decline in market cap.

Grandhi said the 2024 global stock market outlook appears “trickier”, with factors such as improved economic stability, an easing of inflation pressures, the widespread adoption of generative AI in select sectors, and potential spillover effects from issues in China’s property market potentially playing “critical roles in shaping up the market value of companies”.