Apollo argues that the long-running case for growth stocks is weakening as the Magnificent Seven’s earnings advantage narrows and their valuation premium continues to compress. The chart book shows that despite record AI-related capital spending and data center construction, value stocks may be positioned to benefit if earnings growth continues converging with the broader market.
Mag 7 starting to underperform: Markets rotating toward quality and free cash flow
Apollo
Torsten Slok
Research
32 Pages
Key Takeaways
Earnings converge: The Magnificent Seven's earnings growth is projected to move closer to the S&P 493, reducing a key driver of their decade-long outperformance.
Premium compresses: The valuation premium of the Magnificent Seven versus the S&P 493 has declined meaningfully from recent highs, making growth stocks relatively less expensive but also less differentiated.
Market remains concentrated: The Magnificent Seven still account for roughly 33% of the S&P 500's market capitalization, leaving the index highly dependent on a handful of companies.
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