With roughly two-thirds of the earnings season behind us, one thing is clear: Growth numbers would not look as good as they do without the “Magnificent Seven.” Goldman Sachs chief U.S. equity strategist David Kostin found that the group’s year-over-year earnings growth in the second quarter is running at 26%. That figure incorporates estimates for Nvidia , which is set to report results at the end of the month. The other Mag 7 members — Meta Platforms , Amazon , Tesla , Alphabet , Microsoft and Apple — have already posted second-quarter earnings. The rest of the S & P 500 is not doing so hot. Kostin noted that year-over-year earnings for all the other stocks in the benchmark index combined is running at just 4%. That includes results from companies that have reported and estimates from those that haven’t. “Results so far have also reflected the continued earning exceptionalism of the mega-cap tech stocks, which represent one of the key sources of upside risk to S & P 500 earnings estimates,” wrote Kostin. .SPX YTD mountain SPX year to date This disparity is another sign of investors increasingly crowding into just a handful of stocks. Indeed, these names have proven resilient despite a backdrop of rising U.S. tariffs and recently shaky jobs data. Six of the Mag 7 stocks — Meta, Microsoft, Nvidia, Tesla, Amazon and Alphabet — are higher since April 2, when President Donald Trump unveiled steep tariff increases on imported goods. Those gains helped the S & P 500 recover from near bear-market territory to trade back at record levels. Of the group, only Apple has declined. The problem with such concentration is that if some of those seven names begin to falter, they will take down the broader market. “We view the S & P 500 as caught in an AI-induced bubble vs bull market paradox,” wrote Citigroup strategist Scott Chronert in a Friday note. “Our leaning is toward the latter. But the path to a structural bull market is not a straight one.” “The past two years of this bull run have been led by the direct beneficiaries of the build out in AI capabilities. This is likely to persist for the foreseeable future. But eventually, a handoff will need to happen whereby Tech/AI users reap the benefits of current AI promise via more durable growth and profitability metrics,” he added.
