Meet the Unstoppable Vanguard ETF With 54.9% of Its Portfolio Invested in the "Magnificent Seven" Stocks

The "Magnificent Seven" is a group of seven American companies with leadership positions in various segments of the technology industry. They got the nickname in 2023 because of their incredible size and their ability to consistently outperform the rest of the stock market.

The Magnificent Seven companies have a combined value of $16.7 trillion, which represents 31.6% of the entire value of the S&P 500 (SNPINDEX: ^GSPC), so they have an enormous influence over the performance of the index.

Market Cap data by YCharts.

When Microsoft (MSFT 0.17%), Nvidia (NVDA 0.28%), Apple (AAPL -0.07%), Amazon (AMZN 0.18%), Alphabet (GOOG 1.16%) (GOOGL 1.32%), Meta Platforms (META -0.59%), and Tesla (TSLA 1.93%) are moving higher as a group, investors who don't own them will generally underperform the S&P 500.

I'm going to introduce you to an exchange-traded fund (ETF) that has more than half of the entire value of its portfolio invested in the Magnificent Seven stocks. It's the Vanguard Mega Cap Growth ETF (MGK 0.37%), and it has consistently beaten the S&P 500 every year since it was established in 2007. Here's why investors might want to buy it for the long term.

Image source: Getty Images.

A concentrated ETF filled with America's highest-quality companies

Some ETFs hold hundreds or even thousands of different stocks. But the Vanguard Mega Cap Growth ETF holds just 69, and the Magnificent Seven account for 54.9% of the total value of its portfolio:

Data source: Vanguard. Portfolio weightings are accurate as of April 30, 2025, and are subject to change.

Artificial intelligence (AI) could fuel the next phase of growth for each of the Magnificent Seven companies, but in very different ways. Apple, for example, designed a series of chips for its latest iPhones, iPads, and Mac computers to run its new Apple Intelligence software. It provides a suite of AI features, including writing tools and a more powerful version of the Siri voice assistant, which transform the user experience for people with Apple devices.

Tesla is another consumer "hardware" company that has turned its attention to AI. The electric vehicle (EV) giant continues to improve its AI-powered full self-driving software, which could be active on public roads as soon as this year.

Nvidia supplies the world's best data center chips for developing AI models. Apple Intelligence wouldn't be possible without it, nor would Tesla's self-driving software. Microsoft, Amazon, and Alphabet are also some of Nvidia's top customers -- they fill their cloud data centers with AI chips and rent the computing power to developers for a profit.

Their cloud platforms also offer access to the latest ready-made large language models (LLMs) to help accelerate their customers' AI software ambitions.

Then there is Meta Platforms, which uses AI in its recommendation algorithm to show users more of the content they enjoy seeing on its Facebook and Instagram. It also launched an AI assistant last year called Meta AI, which already has nearly a billion users. The company's Llama family of LLMs that power Meta AI have become the most popular open-source models in the world.

Although the Magnificent Seven stocks dominate the Vanguard ETF, it does offer some diversification. Large-cap non-technology stocks like Eli Lilly, Visa, Costco Wholesale, and McDonald's are also among the ETF's top 20 positions.

This Vanguard ETF can help investors beat the S&P 500

The Vanguard Mega Cap Growth ETF delivered a compound annual return of 12.5% since its inception in 2007, comfortably beating the average annual gain of 9.6% in the S&P 500 over the same period.

But the ETF has a highly concentrated portfolio, which can be a recipe for volatility. For example, the S&P 500 fell by as much as 18.9% from its all-time high earlier this year as economic and political uncertainty surged due to President Donald Trump's "Liberation Day" tariffs. However, the ETF was down by 22.3% at the same time, because it has much larger positions in the high-flying Magnificent Seven stocks, which pulled back more sharply than the rest of the market amid the chaos.

As a result, investors shouldn't put all of their eggs in one basket. Instead, they should buy the ETF as part of a balanced portfolio, where it has the potential to boost overall returns.

For example, using the returns cited earlier, a $10,000 investment in the S&P 500 would be worth $15,814 in five years. But if you invest $5,000 in the S&P and $5,000 in the Vanguard ETF, your $10,000 could be worth $16,917 instead.

One thing is for certain: Investors will want exposure to the Magnificent Seven, not only because of their excellent long-term track record, but also because they are leading the way when it comes to new technologies like AI.