The Magnificent 7 companies were the stars of the show in 2023. In the new year’s first week of trading, the cohort proved slightly less magnificent. Depending on which of the Magnificent 7 stocks you were watching, the first week of the year was quite ugly. In any case, I don’t think one week of trading should cause investors to lose hope for the rest of 2024.
At the end of the day, stocks don’t care what year it is. With a positive trend (and plenty of catalysts) still in place for most of the Magnificent 7, I think 2024 could be another good year for the market’s behemoths. In 2024, I expect the Magnificent 7 to stay magnificent, at least relative to market averages. That said, I think performance among the seven could vary more widely.
We’ve already seen Microsoft (NASDAQ:MSFT) top Apple (NASDAQ:AAPL) for the title of largest market cap last week. As the Magnificent 7 players compete against one another for market share (especially in artificial intelligence), expect more divergence in performance, as some of the Magnificent 7 stocks prove even more magnificent than the pack.
In this piece, we’ll check out three Magnificent 7 stocks I think could do best from current levels.
Despite Apple’s sour start to 2024, I remain enthused as the firm has numerous potential share-price drivers that could pave the way for a swift return to new heights. Heck, such a surge may just help the iPhone maker regain the title of the world’s largest company by market cap.
For now, however, it’s a duel with fellow tech titan Microsoft for the title. Depending on when you’re reading this article, Apple may have already regained the lead on the back of its Vision Pro launch (the company’s spatial computer due for a February 2, 2024 release).
In any case, Microsoft’s lead over Apple has a lot to do with its impressive generative artificial intelligence (or gen AI) capabilities. Copilot has been the talk of the town for Microsoft investors. Many tech firms have tried to follow Microsoft closely every step of the way regarding gen AI. Apple has not been one of them.
Nobody knows what 2024 holds for Apple and AI. Regardless, I view Apple’s lack of AI products in 2023 as a positive for investors looking to put new investment dollars to work. Some stocks with too much AI hype have become too hot to handle.
Alphabet (NASDAQ:GOOG/GOOGL) stock is another Magnificent 7 stock with what it takes to be even more magnificent in the new year. Unlike Apple, Alphabet has been a heavy hitter on the front of AI, with its Bard and Gemini AI products garnering hype from growth investors hungry for more AI exposure.
Dismiss Bard and Gemini as being in the shadow of ChatGPT, if you will. However, I think it’s far too premature to determine which large language model is the better, at least at this early stage in the game. AI models are being updated so rapidly that a lead is bound to be short-lived.
Additionally, AI models may be better or worse depending on the application they’re being run through. As such, I don’t think it makes a lot of sense to throw out blanket statements like one specific AI model is better than ChatGPT.
I view Alphabet as having a good shot at benefiting greatly from AI’s rise. As it stands, Alphabet looks like an intriguing relative value play in the Magnificent 7 basket while it’s trading at 27.33 times trailing price-to-earnings (P/E). Whether or not it builds the AI model to beat, it’s a great company with ample skin in the game.
Finally, we have the e-commerce and cloud sensation in Amazon (NASDAQ:AMZN), fresh off an explosive rebound that saw shares surge nearly 58% in the past year. As a massive market disruptor, no firm is truly safe from the company’s disruptive innovations.
I’m pretty convinced it’s in the business of rapidly expanding into new markets via technology rather than a firm content sticking within its circle of competence in the already sizeable e-commerce and cloud services markets. If AI represents the next “tool” to target new markets to disrupt, you can bet that Amazon will be all over it. Given this, I expect Amazon is quite possibly the most magnificent of the Magnificent 7 stocks if sustained, explosive growth is what you seek.
In the new year, Amazon has plenty on the line as it embraces the AI wave. The company has an intriguing chatbot in Q, which could improve over the next year. Though the AI offering has its fair share of hallucinations (which doesn’t these days?), I view the bot as an excellent first step in an AI race that could span many decades.
On the date of publication, Joey Frenette owned shares of Apple, Microsoft, Amazon, and Alphabet (Class C). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.