Investor anxiety surrounding the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla — reached a fever pitch in early 2025. These tech titans, which collectively powered the equity rally in 2024 with the Roundhill Magnificent Seven ETF (MAGS) registering a 64% total return, have now become the epicenter of market volatility. A cocktail of macroeconomic headwinds, including aggressive U.S.-China tariffs, rising inflation expectations, and fears of a global slowdown, has triggered a sharp correction across the group.
Despite a historic rebound off the April 7 intraday price lows, the S&P 500 and the Magnificent Seven are still well off their 2025 highs. Earnings season is looming and bearish sentiment is abundant.
In our view, there are reasons for optimism — and opportunity — amid the market turmoil.
Expected Growth: Mag 7 > S&P 493
As we recently highlighted in our April Roundhill Roundup, a recalibration of earnings expectations could be in order as the extent and timing of reciprocal tariffs are determined. The White House recently announced exclusions for smartphones, computers, semiconductors and other electronics but President Trump also signalled a special tariff on these products could be on the way over the coming months. Could special treatment for certain Magnificent Seven members be in the cards?
Despite ongoing tariff ambiguity, the Magnificent Seven have not yet seen a significant deterioration in estimated 2025 and 2026 earnings. While there has been a stagnation of upward earnings revisions year-to-date, we see the lack of revisions lower thus far as a positive.
Past performance is no guarantee of future results.
Digging a level deeper, the Magnificent Seven are expected to retain their growth edge over the S&P 493 on both a net income and revenue basis. For 1Q’25, the Magnificent Seven are expected to report year-over-year net income growth of 16.1% compared to the S&P 493’s 5.6%. Presently, this net income growth advantage is expected to continue on a quarterly basis through 3Q’26.
Past performance is no guarantee of future results.
The message is similar on the revenue side of the ledger. The Magnificent Seven are expected to report revenue growth of 11.7% compared to the S&P 493’s 3.2% growth rate for 1Q’25. Over the next six quarters, the consensus projects the Magnificent Seven to average year-over-year revenue growth ~8% points higher than the rest of the market.
Past performance is no guarantee of future results.
Even amid rising macro uncertainty and renewed tariff risks, the Magnificent Seven continue to stand out for their strong margins. Next twelve-month forecasts point to robust profitability, supported by scale, pricing power, and operational efficiency. While tariffs could pressure input costs or global demand, these companies are better positioned than most to absorb shocks.
Past performance is no guarantee of future results.
If the overall economy were to slow from here, the Magnificent Seven could serve as an investment option for investors looking for growth at a time when growth may become scarce.
Valuation - A Rare Discount
Judging by next-twelve-month (NTM) price to earnings multiples (P/E), the Magnificent Seven currently sports a 24.9x NTM P/E and is trading at a 1.2x relative premium to the S&P 500. This type of relative valuation hasn't been seen since the 2022 bear market low.
Past performance is no guarantee of future results.
At the security level, five of the seven stocks — Nvidia, Amazon, Google, Microsoft, and Tesla — are trading at NTM P/Es below their respective 5-year averages. Meta and Apple are the lone holdouts with forward valuations that are roughly 1.1x their 5-year averages.
Past performance is no guarantee of future results.
2025’s volatile price action has presented investors with a rare valuation discount relative to recent history. In our view, this could be seen as an attractive entry point for investors with a compelling risk/reward.
Can the Mag 7 Play Defense?
One of the most underappreciated strengths of the Magnificent Seven is their balance sheet firepower. According to their latest annual filings, these companies hold an estimated $600 billion in cash and marketable securities, giving them unparalleled flexibility in capital allocation.
Several members—most notably Apple and Google—have been aggressively repurchasing shares. In the fourth quarter of 2024, five members of the Magnificent Seven spent over $60 billion on share repurchases, accounting for 25% of the S&P 500’s total buyback amount. These buybacks don’t just return capital to shareholders; they also help support earnings per share growth even in more muted growth environments. In a market where many companies are tightening belts, the Magnificent Seven are still deploying capital offensively — bolstering investor confidence and providing a natural floor for their stock prices.
Roadmap for the Magnificent Seven
A lot of attention over recent weeks has been spent discussing what headwinds and problems lie ahead for the Magnificent Seven, but far less on the positive drivers still in play. Breaking it down, the Magnificent Seven could struggle in a deglobalizing world with tariffs staying in place for the foreseeable future. This would negatively impact supply chains, increase costs, dampen margins, and hamper profit growth for the Magnificent Seven. Preferential or special exceptions regarding specific technology-related tariffs from President Trump could be seen as a silver lining for the group.
The bullish case for the Magnificent Seven rests on their unmatched scale, profitability, and exposure to transformative trends like artificial intelligence. Collectively, they trade at a compelling valuation relative to the S&P 500, with growth estimates that far outpace the broader market. Armed with massive cash reserves, they’re leading the charge in AI infrastructure, cloud services, and consumer platforms. Meanwhile, several members of the group have a strong track record of buybacks that could boost EPS growth and provide valuation support. As modern-day staples in everyday life and critical infrastructure in the digital economy, the Magnificent Seven appear well-positioned to drive market leadership despite recent tariff concerns.
While quarterly results will matter, we expect commentary from the Magnificent Seven earnings calls will be scrutinized more than normal for clues on guidance in a time of uncertainty. Any volatility stemming from this earnings season could present a compelling entry point for investors.
Investors should consider the investment objectives, risk, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about Roundhill ETFs please call 1-855-561-5728 or visit the website at www.roundhillinvestments.com/etf/MAGS. Read the prospectus or summary prospectus carefully before investing.
Investing involves risk, including possible loss of principal. The Fund expects to have concentrated (i.e., invest more than 25% of its net assets) investment exposure in one or more of the Technology Industries at any given time, which may vary over time. Further, the Fund expects to obtain such investment exposure by transacting primarily with a limited number of financial intermediaries conducting business in the same industry or group of related industries. As a result, the Fund is more vulnerable to adverse market, economic, regulatory, political or other developments affecting those industries or groups of related industries than a fund that invests its assets in a more diversified manner. The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.
Glossary
Estimated Earnings Per Share (EPS) reflects the consensus estimate for adjusted earnings per share. The consensus estimate is the mean of sell-side analyst estimates.
Price/Earnings Ratio is calculated by dividing the price of the security by Earnings Per Share (EPS).
