Wall Street has been enamored with the “Magnificent Seven,” as the group pushes the broader stock market to all-time highs. The infatuation is at risk of becoming dangerous and could reverse soon, according to JPMorgan. “Markets are at their highs and the ‘love affair’ with U.S. technology & the Magnificent 7 remains extreme,” strategist Khuram Chaudhry wrote. “The dominance of AI stocks continues to drive the largest consensus earnings upgrades, however there are also emerging signs of a peak in sales and earnings revisions on the horizon.” Five of the Magnificent Seven companies reported earnings this week. All beat earnings expectations, but investor reactions weren’t uniformly positive. Meta Platforms and Microsoft both fell as investors worried about how much money they will spend to expand their AI offerings. Alphabet , Amazon and Apple all rose, however. AMZN AAPL,GOOGL,META,MSFT 5D mountain GOOGL, AMZN, AAPL, META, MSFT 5-day chart Collectively, the group is trading at 8.5 times price to sales, a level Chaudhry says is elevated. On top of that, consensus earnings revisions for the cohort look to be moderating – signaling a decline may be at hand. “These levels of revisions are also similar to prior peaks observed in 2021, when mean reversion followed and risk/reward changed,” the strategist wrote. He added that the Mag 7 traded around current valuation levels before the peak seen more than four years ago. “The price change may have further upside, but going into 2026 there is a risk that both the price and earnings revisions mean-revert. This would imply a change in risk/reward and suggest the pace of returns would likely moderate,” he said. The broader market has depended on these seven stocks in its run to record highs. The market cap-weighted S & P 500 is up 16% in 2025, while the equal-weighted S & P 500 has gained just 7% in that time. Put another way: If the love affair between investors and the Mag 7 sours, it will spell trouble for the rest of the market as well.
Investor love affair with Mag 7 stocks could reverse soon, says JPMorgan
