Investors may be tempted to imagine how much higher the S&P 500 Index would be if three of its most influential stocks weren’t lagging behind.
Apple Inc., the third-most-valuable company in the S&P 500, has seen its shares drop 17% this year amid tariff concerns and problems developing artificial intelligence services. Alphabet Inc., the $2.1 trillion internet advertising giant, is down 7% amid fears that AI chatbots will eat into its lucrative Google search business. Meanwhile, Tesla Inc. is down 26% amid slumping electric vehicle sales.
Those three stocks have been a more than 120 point drag on the market-capitalization weighted S&P 500, which closed on Tuesday with a gain of about 5% on the year, according to data compiled by Bloomberg. All else equal, if the trio were to at least erase losses for 2025, the benchmark would be about two percentage points higher.
“The rally is broadening, but the Mag 7 make up such a massive proportion of the overall market that if they stall, by definition the market will struggle,” said Paul Stanley, chief investment officer at Granite Bay Wealth Management.
After leading the market higher for more than two years, Magnificent Seven stocks have diverged in 2025 with Microsoft Corp., Nvidia Corp. and Meta Platforms Inc. all up 14% or more. The most common difference between winners and losers in 2025 has been AI: firms such as Nvidia have capitalized on computing infrastructure spending while those like Meta have utilized the technology to drive revenue growth.
On the other hand, Apple has struggled to integrate AI features into its devices since unveiling its vision of “AI for the rest of us” over a year ago. The stock is up more than 3% this week after Bloomberg News reported it’s considering using AI technology from Anthropic or OpenAI to power a new version of its Siri assistant.
“It makes sense that people aren’t pouring additional dollars into Apple right now until they have some kind of blueprint for what they’re going to be doing with AI,” said Paul Marino, chief revenue officer of Themes ETFs.
While Microsoft, Nvidia and Meta have been responsible for roughly half of the S&P 500’s gains this year, Netflix Inc., Broadcom Inc. and Palantir Technologies Inc. have also been big contributors. The index is trading near a record high.
The Magnificent Seven, which also includes Amazon.com Inc., accounts for about a third of the S&P 500, roughly the same as the combined weighting of 7 of the benchmark’s 11 main sectors. Amazon shares are roughly flat in 2025.
While a broadening of the rally is encouraging, Granite Bay’s Stanley says it’s unlikely to overcome the drag from the likes of Apple if the underperformance continues in the second half of the year.
“You would really need to see a strong broad market to compensate for weakness in the Mag 7 and I don’t know what can break the rest of the Mag 7 out of their range,” Stanley said.
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