Citi says the Magnificent Seven label has lost its market magic
Citi strategists argue AI has scrambled the old mega-cap stock shorthand and investors should sort the market into three broader groups.
By Sal Moretti · Money Reporter
3 min read
The Magnificent Seven may need to ride off into market-history sunset, according to Citi.
Strategists at the bank, led by Scott Chronert, say the famous label no longer captures what is driving large-cap growth stocks. The group, Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Nvidia and Tesla, has been underperforming the broader market this year, MarketWatch reported.
Citi’s bigger point is sharper: the seven stocks no longer move neatly enough as a bloc to make the nickname useful. The bank says the artificial-intelligence build-out has created winners, laggards and important players outside the old club.
The strategists compared the moment with the fading of FAANG, the earlier shorthand for Facebook, Amazon, Apple, Netflix and Google. Facebook is now Meta Platforms, while Google is part of Alphabet.
AI scrambled the old club
Citi says the problem starts with the way AI infrastructure has changed the market map. Some companies in the old Magnificent Seven are central to AI spending, while others are less directly tied to the hardware and infrastructure boom.
Broadcom helped push the issue into focus, according to Citi. Earlier this year, the chip and infrastructure company passed Meta and Tesla in S&P 500 weight, a move Citi said showed that the Magnificent Seven label was missing important AI-related shifts inside the index.
Adding Broadcom and calling it a “Mag 8” would not solve the problem, Citi argued. Micron Technology and Advanced Micro Devices also climbed in value, making the old seven-stock frame look even more cramped.
A “Mag 10” would still leave out other companies that matter to earnings, the strategists said. Citi pointed to Intel, Applied Materials, Cisco and Lam Research as examples of contributors that would not fit inside that expanded shorthand.
Citi wants three market buckets
Citi’s proposed fix is broader and cleaner: divide the market into cyclicals, defensives and growth.
Cyclicals include groups such as banks, financial services, insurance, materials, energy, transportation, capital goods, consumer services, and consumer durables and apparel.
Defensives include health care, pharmaceuticals and biotech, utilities, real estate, telecom services, food and beverage, household and personal products, and consumer-staples retail.
Growth includes semiconductors and semiconductor equipment, software and services, technology hardware, media and entertainment, automobiles and components, and consumer discretionary distribution and retail.
Citi says that structure catches the mega-cap names and most of the index companies tied to AI infrastructure, while avoiding a narrow fight over whether the market should be described as Mag 7, Mag 8 or Mag 10.
The bank acknowledged that some placements can be debated. Tesla’s role pulls automobiles into the growth bucket, while Amazon helps place consumer discretionary distribution and retail there.
Growth keeps carrying the earnings story
Citi’s earnings figures show why the bank prefers the broader growth cluster. The growth group’s earnings per share fell 8.9% in 2022, then rose 15.6% in 2023, 23.4% in 2024 and 21.8% in 2025. Citi estimates 41.9% growth in 2026.
By comparison, Citi lists S&P 500 earnings-per-share growth at 4.1% in 2022, 12% in 2023, 10.4% in 2024, 12.4% in 2025 and an estimated 24.3% in 2026.
The strategists said the growth cluster has kept delivering stronger results and higher forecasts for this year, along with upward revisions to 2027 estimates. In Citi’s view, that is where investors should look if they want to understand the market’s AI-driven earnings power.
This story draws on original reporting from MarketWatch.