Goldman Sachs remains bullish on the long-term trajectory of the market’s largest technology stocks, despite a bumpy start to 2025. In a recent note, Chief U.S. Equity Strategist David Kostin reaffirmed the firm’s expectation that the so-called “Magnificent Seven”—Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla—will once again outperform the broader S&P 500 over the next year.
Kostin acknowledged the recent underperformance of this mega-cap cohort. As of the end of the first quarter, the group was down roughly 5% on a year-to-date basis, lagging the 4% gain registered by the other 493 companies in the S&P 500. Heightened regulatory scrutiny, trade policy concerns, and competitive shifts in AI have contributed to near-term pressure on valuations. Even some institutions, including Morgan Stanley, have publicly suggested that investors consider trimming exposure to Big Tech.
Yet Goldman sees the recent pullback as a potential buying opportunity for long-term investors. “We continue to expect that superior earnings growth will drive the Magnificent 7 to outperform the S&P 493 in 2025, but by a smaller magnitude than in recent years,” Kostin wrote.
That relative earnings strength is already showing up in the numbers. In the first quarter, earnings-per-share for the Magnificent Seven rose 28% year-over-year, significantly outpacing the 9% EPS growth seen across the remaining S&P 493 constituents. Goldman noted that the scale of this outperformance marked the strongest earnings beat by the cohort since the second quarter of 2021, when the group surpassed consensus estimates by 27%.
“Partly as a result of strong 1Q results, consensus 2025 earnings estimates for the Magnificent 7 are roughly in line with where they began the year,” the report stated, suggesting that sell-side analysts continue to view the group’s forward prospects as robust, even amid ongoing market volatility.
This earnings resilience comes at a time when valuation multiples across the Magnificent Seven have moderated. After years of expansion, the cohort’s relative P/E ratio has compressed, reflecting a slowdown in the pace of earnings outperformance. According to Goldman, the group’s forward valuation is now at its lowest level in two years, improving the risk/reward balance for entry points.
“From a starting point of entry, it's actually looking somewhat more attractive at these levels,” Kostin told Bloomberg Television, referencing both the valuation reset and the earnings growth premium.
The note underscores Goldman’s base-case view that while mega-cap tech may not repeat the outsized returns of 2023 and 2024, the segment remains positioned for continued leadership on an absolute and relative basis. The strategic implication for advisors and portfolio managers is to view short-term dislocation in these names not as a signal to exit, but as a chance to revisit weighting within an equity allocation that emphasizes earnings quality and growth durability.
This recommendation may resonate with RIAs and institutional allocators seeking to balance tactical caution with long-term conviction. While the early-year drawdown has sparked debate around portfolio concentration risk, Goldman contends that earnings fundamentals will reassert themselves as the primary driver of performance over the remainder of the year.
For context, the Magnificent Seven accounted for the bulk of the S&P 500’s total return in both 2023 and 2024. Even with increased dispersion expected in 2025, Goldman projects that earnings tailwinds will continue to distinguish these companies from the broader index. Importantly, while past cycles have seen leadership rotate away from large-cap growth during periods of interest rate volatility or macroeconomic tightening, Goldman believes current dynamics are more supportive.
One reason: secular growth themes—particularly in AI infrastructure, cloud services, digital advertising, and electrification—remain intact. Nvidia, for example, continues to anchor the AI buildout, while Microsoft and Alphabet expand their enterprise SaaS offerings and Amazon optimizes its logistics footprint. Meta and Apple, despite headline risk around regulation and privacy, are still generating free cash flow at levels most companies can’t match.
Advisors should also consider valuation compression not as a red flag, but as a potential entry catalyst. As of April, the Magnificent Seven’s forward P/E ratio had dropped to approximately 25x, down from peaks near 35x in mid-2023. That compares to a trailing 17x average across the remaining S&P 493. When adjusted for earnings growth, the PEG ratios of the tech giants now appear more in line with broader market levels—offering a more favorable tradeoff for clients with longer investment horizons.
Kostin’s team doesn’t downplay the risks. The note identifies several headwinds that could cloud the outlook: renewed antitrust scrutiny from U.S. and EU regulators, a less favorable trade environment under shifting political leadership, and the possibility of tech decoupling between U.S. and Chinese ecosystems. Still, the base case remains bullish.
"Relative valuation has de-rated materially," Kostin added. "If earnings delivery continues, which we believe it will, these names should still outperform."
For wealth managers crafting equity strategies in a year defined by macro crosscurrents, Goldman’s position supports a barbell approach—maintaining core exposure to large-cap tech while exploring satellite allocations in sectors with cyclical upside or inflation resilience. But the message is clear: it is premature to rotate away from Big Tech entirely, particularly when fundamental strength remains intact.
For advisors who spent 2023 and 2024 navigating concentrated client portfolios tilted toward a handful of tech names, the 2025 market environment may finally offer an opportunity to rebalance without exiting these positions wholesale. The combination of normalized valuations, resilient earnings, and high free cash flow yields presents a compelling case for maintaining selective overweight exposure.
Notably, while broader diversification remains essential for risk-adjusted returns, abandoning the sector altogether would mean forgoing one of the few corners of the equity market still posting double-digit earnings growth.
The structural advantages enjoyed by the Magnificent Seven—scale, network effects, access to capital, and vertical integration—continue to differentiate them from the average S&P 500 constituent. For clients seeking capital appreciation in an otherwise modest growth backdrop, these companies remain a foundational pillar of U.S. equity leadership.
As 2025 unfolds, advisors may want to focus less on recent price performance and more on earnings trajectory, valuation entry points, and the sustainability of competitive advantages. In that light, the recent pullback across mega-cap tech may offer an unexpected opening to reallocate—especially for clients who were previously underweight or reluctant to reenter at elevated valuations.
In summary, Goldman Sachs sees the Magnificent Seven continuing to outperform, driven by earnings momentum and more attractive valuations relative to history. For financial advisors and portfolio managers, the firm’s analysis serves as a reminder that while sentiment may shift quickly in public markets, long-term equity leadership is still rooted in fundamental performance. The early stumble in 2025 doesn’t change the underlying story: Big Tech, though no longer untouchable, remains essential.
