"'Magnificent 7' Becomes National-Level Financial Power... Surpassing China's Market Cap"

In recent years, the so-called ‘Magnificent 7’ that has led the rally in the U.S. New York stock market is analyzed to be exercising financial power at a national level rather than just being simple companies. The combined market capitalization of these companies not only surpasses that of all Chinese listed companies but also reaches twice the size of Japan’s stock market, which ranks fourth globally.

[Image source=Reuters Yonhap News]

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On the 19th (local time), economic media CNBC reported, citing a research note from Deutsche Bank, that the market capitalization of the Magnificent 7 has grown to the size of the world’s second-largest stock exchange. The Magnificent 7 refers to seven major technology companies listed on the New York Stock Exchange: Apple, Amazon, Alphabet, Meta, Microsoft (MS), Nvidia, and Tesla.

According to Deutsche Bank’s estimates, the combined market capitalization of these seven companies is $13.1 trillion, exceeding the total market capitalization of Chinese listed companies at $11.5 trillion. The only country with a larger market size is the United States ($50.4 trillion), and compared to Japan ($6.2 trillion), it is about twice as large. Galina Podznyakova, an analyst at Deutsche Bank, stated, "The Magnificent 7 alone would be the world’s second-largest stock exchange," adding, "Economically, they exert greater influence than most major countries."

On an individual stock basis, the market capitalization of the Magnificent 7 companies is comparable to the size of major developed countries. MS’s market capitalization is about $3 trillion, similar to the combined total of all listed companies in France, Saudi Arabia, and the United Kingdom. Additionally, the Magnificent 7’s annual total profits amounted to $361 billion, roughly comparable to the total profits of all listed companies in Japan ($383 billion). Compared to the total profits of Chinese listed companies ($777 billion), it accounts for about half.

Deutsche Bank evaluated, "The Magnificent 7 have influenced global investor sentiment over the past few years and months, and they cannot be ignored in any asset class." They mentioned that globalization, the internet and mobile subscription systems, and artificial intelligence (AI) have rapidly increased the scale of these companies. Considering that about 40% of the world’s population still does not have internet access, future revenue growth is expected.

Economic media CNBC assessed, "Among the major 20 countries (G20) excluding the United States, only some countries such as China and Japan have achieved higher profits based on the combined market capitalization of listed companies," adding, "They are exercising greater financial power than most major countries."

However, concerns have also been raised about the excessive proportion of the Magnificent 7 in the global stock market. Jim Reid, head of global economic research at Deutsche Bank, warned in a follow-up report last week that "the top 10% of stocks in the New York Stock Exchange account for 75% of the total market value by market capitalization," noting, "This is the highest level since the 1930s." Historically, the median is about 65%.

Among the Magnificent 7 companies, MS has ranked within the top 5 by market capitalization except for four months since 1997. Apple and Amazon have consistently remained in the top 5 since December 2009 and January 2017, respectively. Alphabet has only fallen out of the top 5 for two months since August 2012. Nvidia entered the top 5 for the first time in the first half of last year.

The market is currently paying attention to whether the rally of the Magnificent 7 will continue. On the 21st, Nvidia, a leading AI stock, will release its earnings. Nvidia has recently risen to third place in market capitalization due to the AI-driven stock price surge. It is expected to join the $2 trillion market cap club soon. On the other hand, Tesla, included in the Magnificent 7, has recorded a stock price decline of about 20% this year.

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