In the sometimes-volatile world of tech investing, seven major companies have defied conventional wisdom, spearheading remarkable market growth. Tesla, Amazon, Apple, Alphabet, Meta, Nvidia, and Microsoft have gained a new nickname—the “Magnificent Seven.” Elevated interest rates, supply chain issues, and on-again-off-again fears of a recession over the last year haven’t hindered their ascent, and they have outshone their peers despite economic uncertainties.

But so far, smaller tech firms haven’t seen the same kind of growth. However, recent earnings reports hint at a potential shift from mega-cap dominance by the “Magnificent Seven,” prompting industry analysts to forecast a broader rally in the tech space.

Driven by recent advancements in artificial intelligence (AI) and cloud computing, the tech sector seems poised for an extended surge beyond the confines of its most illustrious players.

Why the Magnificent Seven Have Done So Well

Amidst the backdrop of a tumultuous 2022, including a harrowing 33% decline in the tech index thanks to the U.S. Federal Reserve’s rate tightening measures, coupled with lingering supply chain disruptions stemming from the Covid-19 pandemic, the stage was set for a remarkable comeback in the tech sector.¹

Those tides began to turn in 2023, as component shortages eased and the Fed’s rate policies evolved, and especially as the importance of AI became clear to the future business models of so many companies in and out of the tech sector. The launch of OpenAI’s ChatGPT in November 2022 sparked a frenzy of investment in artificial intelligence (AI) throughout 2023 by tech giants, laying the groundwork for the resurgence that followed.

Notably, the Magnificent Seven as a group experienced a meteoric rise in 2023, boasting an average return of 111%, compared to a 24% return for the broader S&P 500.² This bullish trajectory was fueled by a combination of factors, including a more accommodating stance from the Federal Reserve, heightened enterprise demand, and the burgeoning influence of AI technologies across sectors.

How the Tech Rally Can Extend Beyond the Magnificent Seven

The optimism surrounding the tech sector extends beyond mere speculation, with concrete indicators pointing towards sustained growth in the coming year.

Predictions of Federal Reserve rate cuts signal a more favourable environment for investment. In December 2023, the Fed suggested it could make a series of rate cuts by the end of 2024, lowering its benchmark to 4.6%. Analysts such a move could come anytime after May 1st.³ And many analysts see positive signs for spending on both digital advertising and IT infrastructure over the coming year, which will be a boon for the tech sector.⁴

More than this, however, the bullish outlook on AI’s growth potential reinforces the sector’s trajectory toward broader expansion. Other tech companies are already emulating the strategies of Magnificent Seven members like Microsoft by monetizing AI and seeing substantial gains.

Salesforce saw Q3 revenue of $8.72 billion, up 11% year-over-year, as it prioritizes digital transformation and focuses on AI-powered products and services like its new Einstein Copilot, an AI-powered CRM assistant.⁵ ⁶ Likewise, Adobe has pivoted toward AI with its Firefly product, a family of generative AI models that allow users to create and enhance images and text effects.⁷ Adobe has also added an AI assistant to its popular Reader and Acrobat apps, which allows users to summarize and query information from PDF documents.⁸

Within the realm of direct AI investment, there are four key areas ripe for exploration: semiconductors, cloud technology, infrastructure software, and application software.⁹

Frontrunners like Nvidia may dominate semiconductors, but opportunity exists for gains by others along the raw materials, components, and semiconductor supply chain, companies like ASML, LAM Research, and TSMC.¹⁰

And companies that provide application software using AI likewise have significant potential opportunities. Cybersecurity provider CrowdStrike Holdings Inc rolled out its generative AI security analyst, Charlotte AI, in 2023 to provide AI-native defense to clients.¹¹ CrowdStrike stock was up 125% last year alone.¹² The case is similar for enterprise database engine MongoDB Inc., which has integrated multiple AI-powered capabilities into its applications, powering everything from enhanced database search to video game development.¹³ ¹⁴ Its stock was up 120% in 2023.¹⁵

And CrowdStrike and MongoDB are only two examples. Many tech companies outside the Magnificent Seven are demonstrating substantial gains, solidifying the notion of a broader rally in tech. As opportunities proliferate throughout the AI supply chain, the stage is set for a transformative period of growth and innovation across the tech sector, expanding well beyond just the Magnificent Seven.

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  1. Savitz, E.J., “Tech’s Rally Isn’t Done. Smaller Stocks Are the Next to Gain,” Barrons, November 27, 2023;
  2. Taulli, T., “What Are the Magnificent 7 Stocks?,” Kiplinger, January 07, 2024;
  3. Neubauer, K. & Avery, D., “Here’s when the Federal Reserve could cut interest rates in 2024,” CNBC, February 27, 2024;
  4. Savitz, E.J., “Tech’s Rally Isn’t Done. Smaller Stocks Are the Next to Gain,” Barrons, November 27, 2023;
  5. “Salesforce Announces Strong Third Quarter Fiscal 2024 Results,” Salesforce, November 29, 2023;
  6. Abdulazez Abdulkadir, A., “Salesforce introduces AI CRM assistant Einstein Copilot,”, February 27, 2024;
  7. Burrows, T., “Firefly GenAI revolutionises Adobe creative processes,” ITWeb, February 28, 2024;
  8. Koller, A., “Adobe launches AI assistant that can search and summarize PDFs,” CNBC, February 20, 2024;
  9. Kitai, D., “Could tech be getting out of the magnificent seven’s shadow?,” Wealth Professional, November 15, 2023;
  10. Ibid
  11. “CrowdStrike Falcon® platform: AI-native protection,” CrowdStrike, n.d.,
  12. Light, L., “Why Tech Rally Will Spread Beyond Magnificent 7,” Chief Investment Officer, November 30, 2023;
  13. “MongoDB Announces Four New AI-Powered Capabilities to Improve Developer Productivity and Accelerate Application Modernization,” MongoDB, September 26, 2023;
  14. Keep, M., “Building AI With MongoDB: Story Tools Studio Brings Gen AI To Gaming With Myth Maker AI,” MongoDB, February 27, 2024;
  15. Kitai, D., “Could tech be getting out of the magnificent seven’s shadow?,” Wealth Professional, November 15, 2023;

Header image source: Getty Images, Credit: Sean Gladwell

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