Remember when everyone was convinced the Magnificent 7 were overpriced? Yeah, about that. Goldman Sachs just threw cold water on the “bubble” narrative, and honestly, they might be onto something.
Here’s the deal: Meta, Tesla, Amazon, Apple, Microsoft, Alphabet, and NVIDIA have been getting absolutely hammered this year. Most are down or barely up. But here’s where it gets interesting—they just reported earnings that crushed expectations by 13%, the biggest beat since Q3 2023. That’s not nothing.
The real plot twist? While these stocks tanked, their valuations actually got *reasonable*. Alphabet is now trading at a P/E of 18 (down from 28 a year ago). Meta’s at 26, down from 29. Even Amazon dropped from a ridiculous 54 to 33. NVIDIA’s still pricey at 45, but that’s way better than the 72 it was trading at before.
Tesla’s the weird kid at the table though—its P/E skyrocketed to 162 after the election rally. That one still looks sketchy.
Goldman’s John Flood thinks these companies are positioned to outperform this summer because they’re less dependent on economic growth, which means they can weather uncertainty better. Plus, mutual funds and hedge funds are still underweight on these names, so there’s dry powder left to deploy. July’s also typically when corporate buybacks kick into high gear, which could be another tailwind.
The numbers back it up: Meta’s up 19% YTD, Microsoft’s up 12%, NVIDIA’s up 6%. The rest are in the red, but if Flood’s right, that’s about to change.
Bottom line? The Magnificent 7 aren’t dead—they’re just on sale. Whether that rally has legs depends on whether earnings keep beating and the economy stays stable. But for once, the valuations actually make sense.
