Without Magnificent 7, S&P 500 YTD Returns 7%
Investors have been voicing concerns about the increasing dominance of the Magnificent 7 stocks in the S&P 500.
But what’s the real issue?
The key concern is that their outsized weight distorts the market’s true health and gives a misleading picture of broad strength.
Take just two days ago: the S&P 500 hit a record high—yet 80% of the index’s components closed lower. The index has arguably lost its meaning as a barometer for the overall market.
Today, the Magnificent 7 make up around 36% of the S&P 500’s weight and have contributed 9.42% to its year-to-date returns. The index is up 16.28% YTD—so without the Mag 7, the S&P 500 would only be up about 7%.
That’s hardly a strong bull market.
In fact, 225 stocks—or 45% of the index—are in the red this year. Not many would call that a broad-based rally.
We’ve also seen several blue chip stocks suffer heavy drawdowns. Below are ten wide-moat names that have declined YTD.
Two themes stand out:
AI disruption: Companies like Salesforce, Adobe, and Accenture are seeing weaker demand as businesses shift to newer AI tools that replace or reduce the stickiness of their traditional offerings.
Tariff impact: Consumer staples have been hit by rising costs from tariffs, making their products more expensive to sell and distribute.
Some names like Adobe and Chipotle were previously discussed. Fiserv has also been a major casualty, but for different reasons—mainly poor leadership, which the board has since addressed with a management shake-up.
If we look at sector performance, consumer staples is the only S&P 500 sector in the red. For patient investors, this might be a place to hunt for value among discounted names.
Even those who’ve ridden the AI wave are starting to wonder how long the run can last.
Nvidia just crossed the $5 trillion mark. Microsoft and Apple are now both in the $4 trillion club.
I’m feeling uneasy too. It’s starting to look like a bubble—but bubbles can inflate far longer than most people expect.
So far, earnings season has been a litmus test—and most names passed, except Meta.
Magnificent 7 Earnings Snapshot
Microsoft: Positive news post-OpenAI restructuring. It now owns 27% of OpenAI, and with rumors of a $1 trillion IPO, this could be a massive windfall.
Apple: Highest iPhone growth since COVID. Despite incremental upgrades, the brand’s pricing power and stickiness remain strong.
Alphabet: Crushed expectations with over $100 billion in quarterly revenue. Google Cloud grew 35%, and even search revenue rose 15%, easing fears of AI disruption.
Amazon: Reaccelerated AWS growth to 20.2% YoY, after several quarters of mid-teens growth that had investors worried about losing ground to Azure and Google Cloud.
Meta: Delivered solid results, but the market punished it for heavy AI-related capex and large debt levels. Unlike the other hyperscalers, Meta hasn’t figured out how to monetize its AI push. Spending without a clear revenue path is unsettling investors.
Hindenburg Omen: A Warning Sign?
With this kind of binary market outcome—gain if you’re AI, lose if you’re not—some commentators have pointed to the Hindenburg Omen, which was triggered on 30 Oct 2025. This technical indicator flashes when a high number of stocks hit both new 52-week highs and lows simultaneously, suggesting internal market weakness.
But be warned: the indicator has produced many false alarms over the years.
So no, I wouldn’t recommend dumping all your stocks based on one signal.
Bubbles can grow far bigger before they burst. And for long-term investors, sitting out due to crash fears often means missing big gains. For short-term traders, the key is to stick to your exit plan and risk management rules.