Link Between S&P 500 And Magnificent 7 Stocks Turns Negative

Catenaa, Monday, March 23, 2026- The correlation between an index tracking the Magnificent Seven and the equal-weighted version of the S&P 500 turned negative in February and continues to fall with the Iran war.

“We’ve never had a tech cycle move this quickly,” Daniel Newman, CEO of the Futurum Group, told Bloomberg. “We just don’t know what will come next.”

The correlation has been more negative than it is now only one other time since the start of 2016. 

In the first quarter of 2023, the Magnificent Seven, which consists of Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta Platforms, and Tesla, raced ahead as AI euphoria kicked off in the wake of OpenAI’s release of ChatGPT on November 30, 2022. 

Meanwhile, the rest of the S&P 500 remained dormant as it struggled to emerge from a bear market.

From January through March 2023, the Magnificent Seven index climbed 45% while the regular S&P 500 gained 7%. Eventually, the tech enthusiasm spilled over into the broader market, as the S&P 500 finished 2023 up 24% and rallied another 23% in 2024.

This time, the correlation breakdown comes after several months in which the Magnificent Seven lagged the broader market amid concerns about heavy spending on AI. 

From the end of October through February, the Bloomberg Magnificent 7 index fell 7.3%, compared with an advance of 8.9% for the S&P 500 Equal Weighted Index, led by cyclical sectors like energy and materials.

In the weeks since the correlation turned negative, the gauges have swapped positions. While the Big Tech cohort sank into a correction this month, its decline has been smaller than that of the broader benchmark.

Meanwhile, Big Tech’s performance has been hampered by concerns that weighed on the stocks before the fighting started, namely, heavy spending on AI and the disruption the emerging technology will bring.

The last time correlations were this negative, it marked the start of a period of dramatic outperformance for Big Tech. 

From the start of 2023 to February 23, the Magnificent Seven index soared more than 300% while the equal-weight S&P 500 rose just 42% and the regular S&P 500 climbed 78%.

While few Wall Street pros expect a reprise of that performance, there are reasons to be optimistic that Big Tech is primed to reestablish its market leadership. 

The stocks’ retreat has washed out positioning and pushed valuations to attractive levels, creating conditions for outperformance.

The Magnificent Seven index is priced at less than 25 times estimated profits, down from almost 33 times in October and below its 10-year average of 29, according to data compiled by Bloomberg. It’s at the lowest level since the tariff tantrum in April.

A resurgence in the tech giants would be a significant positive for the broader market, considering the seven companies account for about a third of the market capitalization-weighted S&P 500.

Nvidia. The most valuable company in the world, and therefore the biggest weighting in the S&P 500, has stalled out. 

After soaring more than 1,100% from the end of 2022 through July, the stock has traded sideways for seven months amid concerns that its rapid growth is peaking and with investors souring on heavy AI spending by its biggest customers.

That skepticism was evident last week when Nvidia Chief Executive Officer Jensen Huang’s forecast for $1 trillion in data center sales through 2027 failed to excite investors. 

Despite plenty of other good news delivered at its annual developers conference, including Chinese government approval to resume AI chip sales in the country, the stock ended the week down 4.1%.