End of the "Mag 7": are investors becoming more demanding?
How many of the seven US mega-caps have returned more than 20% in 2025? Find out how their performance differs...
The seven American tech giants – nicknamed the "Magnificent 7" – have been a significant part of the American index for several years. They therefore played a driving role in the overall performance of the latter.
When they outperform, they contribute heavily to market returns. Conversely, when they underperform — as in 2022, when these seven stocks fell by 26% to 65% — they drag the entire index down. The "Mag 7" are now so large that their total capitalization is roughly equivalent to that of all the stock markets of the seven largest countries, after the United States, in a global index.
International investors who position themselves on such an index are therefore highly exposed to the United States and, consequently, to the "Mag 7"; A large part of their performance therefore depends on the evolution of the latter. The dominance of a few large-cap stocks in an index also reduces the impact of the many other U.S. companies, both in the U.S. and around the world, that are performing well.
The performance of the Mag 7 in 2025, and so far in 2026, has been divergent. Five of the seven underperformed the S&P 500 Index in 2025 and all seven underperformed the S&P 500 Index in the first quarter of 2026.
The "Mag 7" all underperformed the S&P 500 in Q1 2026
Past performance is not indicative of future performance and may not be repeated.
Sources: LSEG Datastream, S&P and Schroders. Year-to-date data (YTD) is as of March 31, 2026.
The chart shows that returns in 2025 have ranged between +5% (Amazon) and +66% (Alphabet). There is also a strong dispersion of (negative) returns in the first three months of this year.
Part of this divergence is likely due to AI investment strategies, which vary from company to company, even as skepticism grows about the returns that these massive AI spends will actually generate for investors.
Market concentration is not limited to "Mag 7"
While Mag 7s are well known to represent a high concentration in the U.S. stock market, this phenomenon is not limited to the United States. As the chart below shows, other markets are also dominated by a small number of large caps. In the UK, for example, five stocks alone account for more than a third of the index.
Similarly, a limited number of countries can dominate international indices. For example, the US market represents 70% of the MSCI World index at the end of April 2026. As for emerging markets – see chart below, on the right – only four Asian countries (China, Korea, Taiwan and India) account for nearly 80% of the index.
Market concentration is a global phenomenon
Sources: LSEG Datastream, MSCI and Schroders. Data as of March 31, 2026.
It is important for investors to be aware of the concentrated exposures they are taking, often unknowingly, when investing in equity indices. Investing in a broad stock index does not guarantee diversification: for this to happen, more in-depth analysis and a better understanding of the exposures and business models of the underlying companies is required.
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