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What bubble? The Magnificent 7 stocks are actually undervalued, JPMorgan says

What bubble? The Magnificent 7 stocks are actually undervalued, JPMorgan says
  • Mega-cap tech leaders look cheap compared to the rest of the S&P 500, JPMorgan says.

  • The group is currently trading less stretched than a few years ago, given earnings delivery.

  • The group is still at risk if earnings disappoint investors' high expectations, the analysts said.

Investors fretting over a potential bursting of the tech bubble can calm down, as the Magnificent Seven looks pretty inexpensive relative to the rest of the stock market, JPMorgan says.

Analysts at the bank said valuations among the group of AI-energized mega-cap stocks are still reasonable compared to average prices for the rest of the S&P 500 over the past five years, despite their disproportionate share of returns for the benchmark index this year.

"There is a concern over the very strong outperformance of Mag-7, but we note that the group is currently trading less stretched than a few years ago, given earnings delivery," JPMorgan's analysts wrote in a note on Monday.

The Magnificent Seven – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – command nearly 30% of the S&P 500 market cap. That's sparked concerns about overconcentration and has fueled fears of a sudden end to the AI bubble mirroring the collapse of the dot-com craze in 2000.