J.P. Morgan says the Magnificent Seven's painful valuation reset may be largely complete, potentially removing one of the biggest headwinds weighing on mega-cap technology stocks. Equity strategists led by Mislav Matejka said the group's 12-month forward price-to-earnings multiple relative to the broader market has fallen to around one standard deviation below its historical median and now sits at a 10-year low. That marks a striking reversal for Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms and Tesla, which have historically commanded substantial valuation premiums because of their scale and growth. The bank said the Magnificent Seven have been de-rating alongside the broader technology sector, but the adjustment has now largely run its course, having already argued in March that the selloff in valuation multiples may have become excessive. J.P. Morgan said some reduction in multiples makes sense because the economics of several mega-cap technology companies are changing, with AI infrastructure spending driving capital expenditures sharply higher and contributing to greater leverage and weaker free-cash-flow profiles. Still, the strategists believe a substantial portion of that adjustment is already reflected in valuations, and the key distinction is that they are not necessarily saying the Magnificent Seven are cheap in absolute terms, only that their valuation premium relative to the rest of the market has already compressed unusually far.
Apple Inc.
Amazon.com Inc
Applovin Corp
Alphabet Inc Class C
Microsoft Corporation
NVIDIA Corporation
Meta Platforms Inc.
Tesla Inc