The Magnificent Seven: Back in the Driver's Seat—But Are They Still a Buy?

Tech stocks have reclaimed their dominance following a turbulent beginning to the year—a resurgence that seems eerily reminiscent as investors aim to leave April's market downturn behind them permanently.

After falling out of favor in the first four months of 2025, the so-called Magnificent Seven group of megacap tech companies has fueled The stock market's rebound in May following the steep decline seen last month, after President Donald Trump announced aggressive and far-reaching trade tariffs on April 2.

Investors are now wondering what it will take for tech stocks to maintain their leadership for the rest of the year — and how to position their portfolios should volatility return to U.S. financial markets.

The Roundhill Magnificent Seven ETF which offers equal-weight exposure to the seven megacap companies — Nvidia Corp. Apple Inc. Google parent Alphabet Inc. Meta Platforms Inc. Microsoft Corp. Amazon.com Inc. and Tesla Inc. — has risen 18.2% since its recent low on April 8, according to FactSet data.

Those overhyped conditions in April caused investors to return to some of the earlier market leaders once again. possible easing of trade conflicts , and the fact that the U.S. economy may avoid falling into a recession ,” said Anthony Saglimbene, chief market strategist at Ameriprise.

Strong first-quarter earnings for tech companies also helped the Magnificent Seven rally off their April lows and drew investors back to megacap names, defying market concerns about the durability of the artificial-intelligence theme and the long-term profitability of these companies, Saglimbene told CryptoScope Dailya phone interview.

Slightly less aggressive valuations for Big Tech have also attracted investors once again. The forward price-to-earnings (P/E) ratio of the Roundhill Magnificent Seven ETF dropped to approximately 23 on April 8, down from roughly 30 at the beginning of the year. This represented its lowest point since the fund launched in April 2023, as reported by Dow Jones Market Data.

Major tech companies continue to fall behind this year.

While the rebound in the Magnificent Seven over the past two weeks offered some relief for Retail investors are enthusiastically purchasing stocks at lower prices in the marketplace. It wasn’t sufficient to improve their performance for the year. So far, the technology-linked segments of the S&P 500 have continued to lag behind both the overall large-cap benchmark and its more resilient industries, indicating that investors remain hesitant about reinvesting in tech stocks at these levels.

Read from February: Is this a bubble? The 'Magnificent 7' combined market capitalization currently matches the gross domestic product of 11 key global cities.

Another warning sign comes from the S&P 500’s consumer discretionary sector, which has dropped by 11.7% year-to-date in 2025. Meanwhile, the information technology and communication services sectors have declined by 8.2% and 4.5%, respectively, over the same timeframe, as reported by FactSet data.

On the opposite side of the range, stocks from utility firms and consumer staples businesses—the usual safe havens in the equity markets—have been standout leaders among top-performing equities during the initial part of 2025. As stated by FactSet, the utilities segment of the S&P 500 index has surged by 5.8%, whereas the consumer-staples category has climbed 4.4% within the same timeframe.

Should you wager on big tech stocks or opt for a more cautious strategy?

To be sure, Investors were searching for strategies to protect themselves. In the initial months of 2025, worries about economic expansion and President Trump's tariff proposals agitated Wall Street.

However, robust financial reports from tech firms have caused many investors to be uncertain about whether they should continue investing in a potential surge in technology stocks or adopt a more cautious strategy.

Barclays reports that first-quarter earnings figures have underscored an increasing gap in earnings growth between major technology firms and non-technology businesses.

Megacap technology firms beat annual earning-per-share growth estimates by 8% in the first three months of 2025, while nontech earnings fell short of forecasts in the same period, a team of Barclays strategists led by Venu Krishna said in a Thursday client note.

Earnings expectations are also favorable for technology names: Cyclical stocks are projected to outpace defensives through 2027, according to Janus Henderson Investors (see table above).

To be sure, another reason why megacap tech companies came under pressure this year — aside from tariffs that could punish international sales — was concerns about potential overspending by U.S. companies on AI infrastructure after China’s release of the DeepSeek platform .

During the first quarter, we observed strength in earnings trends within cyclically driven industries such as technology and communications services," noted Jeremiah Buckley, a portfolio manager at Janus Henderson. "However, predictions for more defensively oriented segments of the market, including utilities and food manufacturers, remained relatively stable or even declined.

Still, certain analysts warn against directly comparing the Magnificent Seven with defensive stocks, as they attract distinct categories of investors for varying motives.

Shares in the utility, consumer staples, and healthcare industries are frequently viewed as defensive because these businesses typically function in sectors that aren’t heavily impacted by economic fluctuations. This makes their performance relatively stable during recessions, providing a safeguard for investors looking to mitigate risk within their portfolios.

"You may not see the same degree of earning increases each quarter with defensive stocks, but during an intensifying trade conflict or economic downturn, these firms tend to perform better... hence, you're essentially purchasing protection," explained Mike Cornacchiali, who serves as the senior vice president for investment strategy at Citizens Private Wealth, speaking over the phone to CryptoScope Daily.

See: Trump suggests imposing an 80% tariff on China. Here’s why such a high rate might derail this weekend’s negotiations.

This weekend's U.S.-China trade discussions will be under the spotlight for investors as the key upcoming event, despite the stock market being closed during the weekend. Representatives from these two biggest global economies will be involved. met in Geneva , Switzerland, on Saturday and Sunday, as Washington and Beijing aim to find a way forward amidst an intense trade dispute.

U.S. equities closed the week in negative territory on Friday. The Dow Jones IndustrialAverage declined by approximately 0.2% for the week, whereas the S&P 500 dropped 0.5%, and theNasdaq Composite fell 0.3% during the same timeframe, as reported by FactSet data.