Investing.com | Editor Venkatesh Jartarkar
Published Oct 24, 2023 12:40AM ET
The influence of these seven behemoth US tech companies, which some people like to call the “magnificent seven” — Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA) — has been massive in driving up global stock gains this year, all thanks to the excitement around the growth of artificial intelligence. These companies have collectively added nearly $4tn to their market capitalization in just 2023 alone, overshadowing the $3.4tn increase for the entire MSCI index. This influence even spills over into international markets, with the MSCI All-Country World index looking at a potential decline if it weren’t for their contributions.
As of today, US companies make up a whopping 61% of the $60tn MSCI index, which is a major leap from less than 50% just a decade ago. The ten biggest stocks now account for almost 19% of the index, a huge jump from 8% in 2013.
However, global stocks have been going through a period of instability in recent months due to concerns about interest rates and geopolitical risks, like the Israel-Hamas conflict. At present, US stocks trade at around 18 times their expected earnings over the next year, while the MSCI all-country excluding US stocks trade at 12 times their expected earnings.
In this kind of environment, Max Gokhman from Franklin Templeton Investment Solutions and Jurrien Timmer from Fidelity are cautioning investors about assuming that non-US stocks being cheaper automatically means they will outperform. They’re pointing out that the “magnificent seven” could face some pressure if they don’t show tangible benefits from AI growth next year. However, they also suggest that growth stocks might fare well when interest rates begin to go down.
In other news, OpenAI, the group responsible for ChatGPT, is in discussions with investors for a share sale that could value the company at around $86bn. That’s triple its value since April!
The continued dominance of US companies in global markets has raised concerns about a potential monopoly. This could have unfavorable consequences for liquidity in other markets and incentivize companies to move their listings to the US for higher valuations and trading volumes.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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Written By: Investing.com