The tech rally is about a lot more than Magnificent 7 right now

Key Points

• It seems likely that the tech rally extends beyond the Magnificent 7, with broader market participation and new sectors driving growth.

• Research suggests AI, cloud spending, and semiconductors are key drivers, involving companies like CrowdStrike and Broadcom.

• There is controversy around whether this broadening rally is sustainable, with some experts questioning valuations.

Recent Performance

The tech rally in 2025 shows 46% of S&P 500 companies outperforming the index, up from ~30% in recent years, indicating a wider spread beyond the Magnificent 7 ([Finance Yahoo: The 2025 stock market rally isn't just about the 'Magnificent 7']([invalid url, do not cite])).

Driving Factors

AI adoption and cloud spending are fueling growth for companies like CrowdStrike (+125% in 2023) and MongoDB (+120% in 2023), while semiconductor firms like Broadcom and AMD are critical ([Ai-CIO: Why Tech Rally Will Spread Beyond Magnificent 7]([invalid url, do not cite])).

Sector Trends

Financials and Materials lead S&P 500 sectors in 2025, while Information Technology, which includes many Magnificent 7 companies, lags, suggesting a diversification in market leadership ([Forbes: 3 Ways To Profit With Big Tech Back In The Driver's Seat]([invalid url, do not cite])).

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A Comprehensive Analysis of the Tech Rally Extending Beyond the Magnificent 7

As of 09:48 AM PDT on Saturday, June 28, 2025, the tech rally is increasingly recognized as extending beyond the traditional "Magnificent 7" tech giants, encompassing a broader range of companies and sectors. This note provides a detailed examination of the drivers, performance metrics, and implications of this broadening rally, drawing from recent market analyses and data.

Context and Background

The "Magnificent 7" refers to a group of leading technology companies—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—that have historically dominated market performance, particularly in the tech sector. Coined in 2023 by Bank of America analyst Michael Hartnett, this group has been pivotal in driving the S&P 500 and Nasdaq Composite, accounting for roughly 35% of the US stock market ([What Are The Magnificent Seven Stocks? A Simple Explainer in June 2025]([invalid url, do not cite])). However, recent market trends suggest that the rally is no longer solely dependent on these giants, with broader participation and new sectors contributing to growth.

Recent Performance and Market Breadth

In 2025, the tech rally has shown significant broadening, with 46% of S&P 500 companies outperforming the index, compared to approximately 30% in each of the previous two years ([Finance Yahoo: The 2025 stock market rally isn't just about the 'Magnificent 7']([invalid url, do not cite])). This shift is driven by company-specific factors in a "micro driven" market, as noted by Goldman Sachs' David Kostin, with key catalysts including healthy economic growth, broadening AI trade, and policy uncertainty. The S&P 500 itself has returned about 4% in 2025, with only two Magnificent 7 stocks—Nvidia and Meta—outperforming, highlighting the diversification ([Finance Yahoo: The 2025 stock market rally isn't just about the 'Magnificent 7']([invalid url, do not cite])).

During a recent sell-off related to DeepSeek, Nvidia fell 17%, while other tech companies like Apple, Meta, and Salesforce rose, illustrating that the rally is not solely dependent on the Magnificent 7 ([Finance Yahoo: Live/stock market today: Nasdaq clobbered, Nvidia sinks 17% while Dow stages comeback as AI fears shake markets]([invalid url, do not cite])). This broadening is further evidenced by sector performance, with all 11 S&P 500 sectors positive, led by Financials and Materials, while Information Technology, which houses several Magnificent 7 names, lags ([Forbes: 3 Ways To Profit With Big Tech Back In The Driver's Seat]([invalid url, do not cite])).

Driving Factors: AI, Cloud Spending, and Semiconductors

The rally is being fueled by several key trends, particularly the increasing adoption of AI and cloud technologies, which are benefiting a wider range of companies. Dan Ives from Wedbush predicts that the tech rally will spread beyond the Magnificent 7 due to accelerating growth stories in AI and cloud spending ([Ai-CIO: Why Tech Rally Will Spread Beyond Magnificent 7]([invalid url, do not cite])). Examples include Microsoft using AI for up to 30% of its coding work and PayPal handling 80% of its customer service with AI, indicating broader industry adoption ([Tech rally has legs amid rising AI adoption, says UBS - Yahoo Finance]([invalid url, do not cite])).

Specific companies driving this rally include:

• CrowdStrike Holdings Inc.: Specializes in endpoint security, with a stock performance of +125% in 2023, though unprofitable.

• MongoDB Inc.: Focuses on data crunching for businesses, with a stock performance of +120% in 2023, also unprofitable.

• Palo Alto Networks: A cybersecurity company with a P/E ratio of 162, benefiting from increased security needs.

Additionally, the semiconductor industry is a critical driver, with companies like Broadcom Inc. (market cap: $804 billion), Advanced Micro Devices Inc. (AMD), Taiwan Semiconductor Manufacturing Co. (TSM), and ASML Holding NV playing pivotal roles. These firms are undervalued and essential for manufacturing, bridging design and manufacturing, and controlling equipment/lithography, forming the backbone of global production ([Moneyshow: Expert Insights on Tech Stocks]([invalid url, do not cite])).

The following table summarizes key companies driving the rally beyond the Magnificent 7:

Company	Specialty	Stock Performance 2023	P/E Ratio
CrowdStrike Holdings Inc.	Endpoint security	+125%	Unprofitable
MongoDB Inc.	Data crunching for businesses	+120%	Unprofitable
Palo Alto Networks	Cybersecurity	Not specified	162
Broadcom Inc. (AVGO)	Semiconductors	Not specified	Not specified
Advanced Micro Devices Inc. (AMD)	Semiconductors, innovation	Not specified	Not specified
Taiwan Semiconductor Manufacturing Co. (TSM)	Semiconductor manufacturing	Not specified	Not specified
ASML Holding NV (ASML)	Equipment/lithography	Not specified	Not specified

Sector Trends and Market Dynamics

The broadening rally is also reflected in sector performance, with Financials and Materials leading the S&P 500 in 2025, while Information Technology lags. This diversification suggests that investors are looking beyond tech giants for growth, with value stocks and small caps also taking the stage as tech giants like Nvidia and Apple cool off ([Broadening Rally In US Stocks Offers Hope Beyond Big Tech]([invalid url, do not cite])). This shift is seen as a positive sign for market health, with analysts like Ives predicting the rally will "spread like a brushfire" due to these trends ([Tech's Rally Isn't Done. Smaller Stocks Are the Next to Gain. - Barron's]([invalid url, do not cite])).

Controversy and Sustainability

While the broadening rally is promising, there is controversy around its sustainability. Some experts, like those at Sage, argue that tech stocks' multiples might be too rich to keep fueling the S&P 500 rise, suggesting potential overvaluation ([Ai-CIO: Tech Stocks Multiples Too Rich to Keep Fueling S&P 500 Rise, Says Sage]([invalid url, do not cite])). Additionally, veteran analyst Dan Niles foresees challenges for the Magnificent 7 due to disappointing early 2025 earnings, which could impact overall market sentiment ([Magnificent 7 may not be so magnificent: Veteran analyst warns of storm ahead - Economic Times]([invalid url, do not cite])). This raises questions about whether the rally can maintain momentum without the traditional tech leaders.

Historical Context

Historically, the Magnificent 7 have been the primary drivers of tech rallies, particularly in the 2010s and early 2020s, with their massive market capitalizations influencing major indices. However, the current trend reflects a shift, with the market diversifying away from reliance on these giants, similar to the broadening seen in the late 1990s dot-com boom, though with different underlying technologies like AI and semiconductors ([A Closer Look at Magnificent Seven Stocks | Mellon Investments Corporation]([invalid url, do not cite])).

Conclusion

As of June 28, 2025, the tech rally is clearly about more than just the Magnificent 7, with broader market participation, AI and cloud spending, and the semiconductor industry playing significant roles. Companies like CrowdStrike, MongoDB, Broadcom, and AMD are key contributors, while sector trends show diversification into Financials and Materials. However, controversy around sustainability and valuations suggests potential challenges ahead, reflecting the complex dynamics of the current market.

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