Morgan Stanley’s Reasons to Sell the “Magnificent Seven”
According to a report by analysts from the prestigious U.S. bank, tech stocks have “lost their shine,” and investors are shifting their focus to other types of equities.
Tech Stocks Lose Their Appeal
2024 was an exceptional year for technology, with artificial intelligence (AI) and the surge of the “Magnificent Seven” driving the S&P 500 and Nasdaq to record highs. However, the landscape changed in 2025, as investors began redirecting their attention to other sectors with higher growth potential.
Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, notes that major tech companies are losing their appeal compared to cyclical stocks, which are more closely tied to economic growth. “Tech stocks have lost their shine, while a broader range of companies within the S&P 500 are gaining ground,” she explained.
Since December, the S&P 500 has remained in a narrow range, impacted by uncertainty over tariffs and technology spending. Additionally, volatility in the bond market has heightened investor concerns.
Three Key Factors Behind the Shift
Impact of Monetary Easing – The Federal Reserve (Fed) cut interest rates by one percentage point in the last quarter of 2024 and is now adopting a more cautious approach. One to two additional rate cuts are expected in 2025, benefiting sectors like manufacturing. In fact, the Institute for Supply Management (ISM) manufacturing indices returned to expansion in January, driven by a rise in orders and a recovery in sector employment.
Slowing Growth Among Big Tech – While the S&P 500 as a whole continues to show growth, the index’s 100 largest companies have been outperforming expectations at a slower rate than the next 400 firms. Moreover, the “Magnificent Seven” stocks have struggled to maintain their pace of earnings growth.
Stronger Performance in Other Sectors – As tech stocks face headwinds, other industries are showing stronger performance. Financials, healthcare, and mid-cap companies have gained increased investor interest, along with European stocks and gold.
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