You know ‘em, you love ‘em, you regret not putting your life savings in them back in 2022: It’s the Magnificent 7.

But now that the year is coming to a close, exactly how magnificent was their performance?

Back in 2023, these seven stocks generated a staggering 76% return, far outpacing the S&P 500’s 24% gain that year.

2024 still saw these companies reaping huge rewards from AI hype, but the S&P 500’s rally was a little broader this time. While these seven tech titans beat the other 493 stocks in the S&P 500 by a staggering 62% in 2023, they outpaced the same stocks by just 22% in 2024, according to Goldman Sachs—still a resounding overperformance, though a clear slowdown.

Let’s take a look at how each company did:

• Nvidia: The chipmaker gained 182% this year, despite investors' constant fear that the AI darling had finally flown too close to the sun. If there’s one company that has illustrated the power of and promise of AI on stock returns, it's Kingvidia. Jensen Huang’s baby was able to beat investor doubts, antitrust probes from the US, Europe, and China, and a delay of its Blackwell AI chip, to finish the year as one of tech’s top performing stocks.
• Amazon: Your package has arrived, and it contains good news for Amazon investors: Shares are up 50% this year. Even as other retailers such as Target had trouble wooing consumers amid a broader economic slowdown, Amazon was still able to rake in record profits. Its summer Prime Day broke sales records, with $14.2 billion sold over the July sale period, and its stock hit an all-time high after a record-breaking Cyber Monday. But retail’s not the only thing it’s doing well: Just this month, Amazon Web Services announced it is planning to roll out its own AI chips.
• Apple: While its performance was not as impressive as fellow tech giants, Apple managed to still end the year up 34%. The firm rolled out Apple Intelligence in October, its own take on bringing generative AI to consumers, an update included integration with Open AI’s Chat GPT. But despite the unveiling of its newest iPhone 16 (yes, there have been that many), shares fell in October after TF International Securities analyst Ming-Chi Kuo said Apple cut its iPhone 16 orders by about 10 million for Q4 and the first half of next year.
• Alphabet: Overall, the company everyone still calls Google jumped 40% in 2024. But the firm faced a number of hurdles, including losing a major antitrust case back in August, which resulted in the DOJ recommending potentially breaking up the company and forcing a sale of its Chrome web browser. However, the election of President-elect Donald Trump has made analysts more optimistic that antitrust scrutiny will simmer down over the next four years. And yes, it’s all about AI, like everyone else: Just this month, its stock jumped after the company announced its own quantum computing chip. Copycat much?
• Microsoft: The company’s performance came in at the lower end of the Mag 7 range, but shares still rose over 16% year to date. The gains show just how competitive playing in the AI game really is. For example, even though Microsoft reported a stellar third quarter in October, with $65.6 billion in revenue and 34% year-over-year growth of its cloud computing service, investors still sent the stock down about 6% the next day due to tepid Q4 guidance. The lesson: You have to do more than just beat Street estimates to impress AI investors.
• Tesla: Elon Musk’s EV maker had a truly wild 2024, ending the year up 85%. Earlier this year, Tesla dropped into the red after major delays unveiling its highly anticipated Cybercab. But Musk was able to claw his way back to a success story, after the election of his close ally Donald Trump in November. Investors were also optimistic about the rollout of Tesla’s “Full Self Driving” (FSD) service and an acceleration in Tesla’s car sales over the last quarter. And then there’s the fact we’ve all been seeing more Cybertrucks on the road.
• Meta Platforms: Shares of Facebook’s parent company shot up 71% higher this year, and the hype wasn’t due to Mark Zuckerberg’s hype beast rebrand. The company has gone all-in on AI, splurging between $37 billion and $40 billion on capital expenditures this year, according to Zuckerberg, an amount that investors scrutinized but also hope pays off big. A boon to Meta stock has been the possible TikTok ban, which would likely drive users to Instagram.—LB

Don’t get us wrong: Wall Street expects that the Magnificent 7 will continue to be the top dogs in AI investing. But if you want to think outside the box, Bank of America can help.

As the chart above shows, BofA analysts believe that global semiconductor sales rise and fall in cycles. Downcycles, or periods of lower sales, usually last four or five quarters, while upcycles last 10 quarters. The current upcycle, or period of higher sales, is only in its fourth quarter—meaning semi sales should continue to rise throughout the coming year.

But which stocks will be the biggest beneficiaries of this trend? In the first half of the year, Bank of America analysts think that current winners like Nvidia, Broadcom, and Marvell Technology will continue to rise.

But in a recent note, they also pointed to lesser-known stocks: ON Semiconductor will benefit from the automotive industry’s recovery in the second half of the year, Lam Research Corp. will profit from a strong increase in capital expenditures, and Cadence Design Systems will maintain profitability even if the hardware cycle slows later in the year.

These stocks may not be on your radar at the moment, but as AI spending continues to accelerate in the months ahead, they’re well worth watching.

Watching Nvidia soar quadruple digits in only a few years, along with its king nerd Jensen Huang assuming rockstar status, would lead anyone to ask the question: Have AI tech stocks finally gotten too hot?

The AI stock rally over the past two years bears an eerie resemblance to the dot com boom of the late 1990s—and we all know how that story ended.

While few analysts think that AI is all hype, it's undeniable that a few of the key tech stocks that have ridden the wave of machine learning are overvalued.

“The dominance of Magnificent Seven (Mag 7) tech stocks could give way to new market dynamics in 2025 as valuations diverge, geopolitical uncertainty grows, and policymakers focus on balancing inflation and growth,” explained Marc Pinto, Head of Americas Equities at Janus Henderson, in a note.

But analysts are expecting the great Mag 7 reckoning to be more of a lackluster lag, not a complete implosion of the sector à la the dot-com bust.

The big picture: David Kostin, Goldman Sachs’s chief US equity strategist, pointed out in a recent note that the Mag 7 is unlikely to sustain the level of growth it has enjoyed over the past two years. The Mag 7’s “premium return gap,” which is the percentage that the group of stocks outperforms others in the S&P 500 index, was 62% in 2023, 22% this year so far, but is projected to be only 7% in 2025, according to Kostin. That’s still an outperformance, but not by the same huge margins we’ve seen.

The breakdown

• Nvidia: The majority of analysts covering the stock still have a “buy” rating on it. The average price target set on the stock is $173—about 23% higher than shares trade today.
• Microsoft: The analyst consensus for Microsoft is a “buy” rating, with an average price target of $505, 15% higher than shares trade now.
• Alphabet: Analysts also overwhelmingly have a “buy” rating on Alphabet stock, with its average price target of $210—7% higher than shares trade today.
• Meta Platforms: The majority of analysts covering Meta have a “buy” rating on the stock, and its average price target is $657, 8% higher than shares trade now.
• Amazon: The vast majority of analysts have a “buy” rating on Amazon stock, with an average price target of $238—only 4% higher than today's price.
• Apple: While the analysts consensus on Apple stock is still “overweight,” its average price target is $244, 5% lower than where shares are trading now.
• Tesla: Overall, analysts are the most bearish on Tesla—its consensus rating among analysts who cover the stock is “hold,” and analysts have an average price target of $296, 35% lower than where shares trade now.—LB

“In a gold rush, sell picks and shovels.”

That advice might seem a bit antiquated in a world of fast-evolving technology, but the truth is that it’s never been more relevant. While most investors think about companies like Nvidia and TSMC when they imagine investing in AI, there’s a problem: Every other investor in the world thinks the exact same thing. That’s why the prices of these stocks have surged over the past few years, and why now’s the time to try to find new angles on investing in AI.

In other words, stop trying to mine the same semiconductor stock nuggets as everyone else in the market, and find the picks and shovels that are essential to the AI revolution instead.

For example: Utilities had a shockingly strong year after investors realized that high demand for AI meant high demand for electricity. The largest companies on the market are investing billions in data centers that gobble up energy, and have gone so far as to fund the construction of nuclear power plants in order to meet their electricity needs.

Utility stocks have been in the spotlight for months now, and the entire sector is up over 20% in 2024, so it’s understandable if you think a good chunk of the profits to be made in each industry have already dried up. But you’d be wrong.

RBC analyst Shelby Tucker recently highlighted AES Corporation and Brookfield Renewable Partners as two top utility investments for 2025. Tucker likes AES’ established relationship with data center operators, as well as its growing margins. Meanwhile, Brookfield Renewable Partners has a focus on clean energy that Tucker thinks will benefit the company as the world continues to move away from fossil fuels in the coming years.

Let’s be clear: A company like Nvidia isn’t going anywhere anytime soon, and most of Wall Street would agree that putting your money on the semiconductor king isn’t a bad idea. But if you want more bang for your buck in 2025, it’s time to start thinking outside the box.—MR