"Mag 7" no more: are investors becoming more discerning?
How many of the seven US mega-caps returned more than 20% in 2025? See how their performance is diverging...
The seven US technology mega-caps – dubbed the “magnificent 7” – have comprised a large chunk of the US index for several years. This has meant they have been in the driving seat when it comes to the wider index’s performance.
In the years when they do well, they are a major contributor to market returns. When they do poorly – as in 2022 when these seven stocks fell by between 26% and 65% – they drag down the whole index.
The Mag 7 are now so valuable that their total capitalisation is roughly the same as the total capitalisation of the next seven countries' entire stock markets, after the US.
Global investors who buy into a global index will have a large exposure to the US, and from there to the Mag 7 – so there is a lot resting on their fortunes. The dominance of a few mega-stocks within an index also squeezes down the impact of the many other companies in the US around the world that are performing well.
Mag 7 performance during 2025, and so far into 2026, has been divergent. Five out of the seven underperformed the S&P500 index in 2025 and all seven underperformed it in the first quarter of 2026.
All of Mag 7 have underperformed the S&P 500 so far in 2026
Past performance is not a guide to future performance and may not be repeated.
Source: LSEG Datastream, S&P, and Schroders. YTD is as at 31 March 2026.
The chart shows returns in 2025 ranged from +5% (Amazon) to +66% (Alphabet). There is also a wide range of (negative) returns in the first three months of this year.
Some of the divergence is likely due to the companies’ different approaches to AI investment. It comes amid rising scepticism about likely return for investors resulting from large AI spend.
Market concentration is not just a case of the Mag 7
While the Mag 7 stocks are well known to represent a large concentration within the American stock market, this is not only a US phenomenon. As the chart below shows, other markets are equally dominated by a small number of outsize stocks. In the UK, for example, just five stocks make up more than a third of the UK index.
And likewise, a small number of countries can dominate international indices. The US market's weight in the MSCI World index is currently 70% (as at end of April 2026). And in emerging market indices – see chart below, right – just four Asian countries (China, Korea, Taiwan and India) make up almost 80% of the index.
Market concentration is global phenomenon
Source: LSEG Datastream, MSCI and Schroders. Data as at 31 March 2026.
It is important for investors to understand the concentrated exposures they are taking on, often unwittingly, when allocating to market indices. Investing in a broad market index is not the same as achieving diversification, which requires more fundamental analysis and understanding of individual businesses’ exposures and models.
Find out more about investing in active global equities
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