$11 Trillion Market Cap of Big Tech Stocks Nearly Triples Germany’s GDP

• The AI ​​boom has spawned a new group of mega-cap tech stocks known as the Magnificent 7.
• The market value of the group as a whole surged 60% this year to $11 trillion, almost triple Germany’s GDP.
• But skeptics warn that the gains in the seven stocks could soon wane as economic headwinds mount.

This year’s S&P 500 index is dominated by new mega-cap tech stocks, also known as the “Magnificent 7.”

They are the seven largest US public companies (tech giants Apple, Microsoft, Google’s parent company Alphabet, Amazon, Meta Platforms) and two new entrants Nvidia and Tesla.

The group’s combined market capitalization surged 60% ($4.1 trillion) this year to a staggering $11 trillion, thanks to a staggering rally in tech stocks fueled by the hype surrounding artificial intelligence. rice field.

To put it into perspective, this is almost three times the size of Germany’s economy, which is just over $4 trillion by the end of 2022, according to the World Bank.

Apple, Microsoft

Just last week, Apple reached that milestone for the first time in its history, with its valuation surpassing $3 trillion. The gain reflects the continued success of the company’s high-tech products, such as the iPhone and iPad, which have an ecosystem of services and other products built around them.

Microsoft is likely to be the next mega-cap tech stock to reach a $3 trillion valuation, according to Morgan Stanley.

The bank called the stock its “top pick,” and thanks to the stock’s “pole position” in the generative AI race, it should help monetize the trend quickly, with a potential upside of 22% from current levels. said to be sexual.

Nvidia, Tesla

Meanwhile, Santa Clara-based chip maker Nvidia has soared nearly 200% this year, propelling the company into the $1 trillion club for the first time in history.

And CEO Jensen Huang’s fortune grew to $39.2 billion, making him the 34th richest person in the world according to the Bloomberg Billionaires Index.

It’s also justified for Tesla to join the elite group. Shares of the Elon Musk-owned automaker have surged 126% this year. That’s thanks to EV demand boosted by price cuts, charging technology deals with rivals Ford and GM, and investor enthusiasm for AI.

“One way to get in touch with AI is through the ‘Magnificent Seven’ of Amazon, Alphabet (Google), Apple, Meta, Microsoft, Nvidia and Tesla,” Saxo Bank said in its quarterly outlook. .

“Although all of these companies are playing an important role in the development and application of AI, it’s worth remembering that AI is still not the main driver of revenue,” he added.

These seven stocks have been responsible for most of the S&P 500’s gains this year, helping push the benchmark into bull market territory. However, not everyone is convinced.

Fundstrat’s Mark Newton recently pointed out eight warning signs that investors should look out for to determine if a stock market correction is imminent.

At the same time, Morgan Stanley’s top stock picker, Mike Wilson, points out that the AI ​​hype does not ignore the high likelihood that the U.S. economy will slip into a recession, suggesting that slowing economic growth could ultimately lead to He warned that it could ruin the stock market rally in 2023.