If you're a fan of westerns, you may be familiar with The Magnificent Seven, a 1960 movie and its 2016 remake. But the Magnificent Seven exists beyond the silver screen. It's the name that's been given to a group of top technology stocks -- and these particular stocks have been leading the S&P 500 index and the Nasdaq higher in recent times. I'm referring to Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia (NVDA 1.02%), and Tesla.
These players aren't trying to liberate a village from bandits like the seven leading characters in the movie -- but they have paved the way to wealth for many who have invested in them. Each of these stocks has proven its potential to be a great long-term investment after climbing in the triple digits (or quadruple digits in the case of Nvidia) over the past five years. So, you may be wondering whether buying all of the Magnificent Seven stocks could help make you a millionaire...let's find out.
Image source: Getty Images.
The shift to a bull market
First, let's talk a little bit about these top-performing companies. Each one is involved in technology and has some involvement in the field of artificial intelligence (AI). Companies operating in these areas have taken off over the past year for two reasons. First, the market in general has shifted into bull territory as investors bet on an improving economy and the potential for interest rate cuts later this year. And this favors growth stocks since they generally thrive in stronger economic environments.
Second, these stocks have climbed as investors search for ways to bet on an AI revolution. The technology could transform the way the world operates, by streamlining workflows, speeding up drug discovery, and bringing us steps closer to autonomous driving. And those are just a few examples.
So, it's no surprise that a company like Nvidia, whose chips dominate the AI market, has seen its earnings and share price soar. Nvidia makes graphics processing units (GPUs), or the chips that power AI models, and demand for these and its other products and services supporting AI has skyrocketed. In the most recent quarter, Nvidia reported record revenue and net income -- and both climbed in the triple digits year over year.
Nvidia's gains
Nvidia's shares have advanced more than 2,000% over the past five years, yet they trade for 34 times forward earnings estimates right now -- which looks like a reasonable price considering the ongoing demand for Nvidia's products and the company's increasing investment in research and development to stay ahead.
NASDAQ: NVDA
Key Data Points
Now, let's consider how much your investment would have grown if you'd invested $5,000 in each of the Magnificent Seven stocks five years ago. This represents a total investment of $35,000; considering the gains of each stock over five years, your investment today would be worth $232,400. That's fantastic, and it's a big step along the road to millionaire status. Combined with other successful investments over time, this bet on the Magnificent Seven could have helped you become a millionaire.
Is it too late to get in on the Magnificent Seven?
So, today, could investing in the Magnificent Seven do the same -- or is it too late to get in on these top stocks? The Magnificent Seven's long-term prospects remain bright, so over time, they could continue to deliver.
Still, it's important to note that the five-year performance of the Magnificent Seven happened during a time when the market generally has favored technology stocks. There likely will be moments when technology -- and other industries -- fall out of favor, so in that environment, these stocks may not be the top performers.
What this means is it's not a good idea to put all your eggs in one basket and invest in just one area. If you choose to invest in all of the Magnificent Seven stocks, it's wise to balance things out by also investing in industries that could compensate if tech stocks suffer -- for instance, healthcare or consumer staples.
Also, it's key to keep in mind that one or two stocks alone aren't likely to make you a millionaire, and millions generally won't land in your lap overnight. But investing in a variety of quality stocks and holding over the long term may help you along the road to millions -- and the Magnificent Seven could be part of this potential millionaire-maker portfolio.
