TLDR
- The “Magnificent Seven” tech stocks (Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, Nvidia) drove 62% of the S&P 500’s gains in May 2025
- Six of the seven stocks outperformed the S&P 500’s 6.2% May return, with Nvidia and Tesla leading gains above 20%
- The group delivered 27.7% earnings growth in Q1 2025, far exceeding the 9.4% growth from other S&P 500 companies
- Big Tech companies beat analyst earnings estimates by 11.7%, compared to 4.6% for other companies
- Rising bond yields and economic uncertainty have pushed investors toward large-cap growth stocks as a defensive strategy
The S&P 500 recorded its strongest May performance in over 30 years, powered by the return of the “Magnificent Seven” technology giants. Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia combined to account for 62% of the index’s advance during the month.
Tesla and Nvidia led the charge with gains exceeding 20% each in May. Six of the seven companies outperformed the S&P 500’s 6.2% monthly return, with Apple being the only laggard in the group.
The Roundhill Magnificent Seven ETF has climbed approximately 11% over the past month. This performance roughly doubles the S&P 500’s percentage return during the same period.
DataTrek Research co-founder Nicholas Colas noted that capital rotation back into large-cap technology stocks shows the market has found its footing. The outperformance demonstrates genuine momentum in this sector of the equity market.
Superior Earnings Drive Performance
The primary driver behind Big Tech’s outperformance remains their earnings growth advantage. In the first quarter of 2025, the Magnificent Seven delivered combined earnings growth of 27.7% year-over-year.
This growth rate far exceeded the 9.4% earnings expansion seen from the other 493 S&P 500 companies. The technology giants also surprised analysts more frequently with their results.
The Big Tech group beat Wall Street earnings estimates by an aggregate 11.7%. In contrast, the remaining S&P 500 companies only exceeded expectations by 4.6%.
Citi US equity strategist Drew Pettit explained that with valuations remaining elevated across the market, investors are gravitating toward companies with earnings upside. The combination of tariff concerns and macro uncertainty has reinforced this preference for growth stocks.
Market Dynamics Favor Large-Cap Growth
The recent market rally has shown a clear preference for large-cap stocks over smaller companies. This trend has benefited the Magnificent Seven as investors seek stability during periods of uncertainty.
Rising bond yields have also contributed to the tech sector’s outperformance. The 30-year Treasury yield recently approached levels not seen since the financial crisis, making growth stocks relatively more attractive.
Charles Schwab senior investment strategist Kevin Gordon observed that these same technology stocks led the market decline from late February through April. The current bounce represents a reversal of that earlier weakness.
Pettit and his strategy team continue to favor what they call a “growth is defensive trade.” As long as interest rates remain elevated and the 10-year Treasury yield stays well above 4%, growth stocks maintain their appeal.
This environment creates a scenario where there is essentially “only one game in town” for investors seeking returns. The combination of economic uncertainty and elevated rates makes large-cap growth stocks the preferred choice.
The technology sector’s ability to deliver consistent earnings growth while other sectors struggle has reinforced this investment thesis. Investors are paying premium valuations for companies that can demonstrate sustained profitability expansion.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
