Is it time to buy the Magnificent Seven?

Key takeaways

• Valuations for the once-expensive mega-cap tech stocks known as the Magnificent Seven have fallen amid the ongoing selloff in US markets.
  
  
• Meta, Amazon, Microsoft, and Alphabet are now considered undervalued by Morningstar’s fair value metrics, rated 4 stars.
  
  
• Nvidia and Tesla are considered fairly valued, while Apple remains overvalued.
  
  
• Morningstar strategists continue to recommend underweighting growth stocks.

After leading the bull market higher for the better part of two years, the mega-cap tech stocks known as the Magnificent Seven have been among those hit hardest in the ongoing selloff roiling the US stock market. As a result, these formerly ultra-expensive stocks seem less pricey. Some even look cheap enough for Morningstar analysts to call them buys.

The Magnificent Seven—Nvidia (NAS: NVDA), Meta Platforms (NAS: META), Apple (NAS: AAPL), Amazon (NAS: AMZN), Microsoft (NAS: MSFT), Alphabet (NAS: GOOGL), and Tesla (NAS: TSLA) —have dominated in recent years.

A Morningstar analyst evaluates a stock by comparing its current price to their estimate of its intrinsic worth, or fair value. A price/fair value ratio higher than 1 indicates a stock is overvalued, or expensive, while a ratio under 1 indicates that it’s undervalued, or cheap.

The chart below shows how the price/fair value ratios of the Magnificent Seven have changed over the past six months. All but Apple are now trading in fairly valued or undervalued territory—a major change from last year.

Figure 1: Magnificent seven price-to-Fair-Value over time. Source: Morningstar Direct.

The 'Magnificent Seven' falter

Seemingly insatiable investor appetite for artificial intelligence and growth propelled the Magnificent Seven higher in 2023 and 2024. They grew significantly more expensive than the rest of the market, but investors appeared willing to pay that premium, thanks to powerful earnings growth and optimism surrounding AI.

But with slowing economic growth and policy uncertainty, 2025 brought major changes for the stock market. The mega-cap tech trade began to unwind as investors sought opportunities in other areas, and the Magnificent Seven lost momentum. New AI developments from China also weighed on the group.

Now, with a selloff in full swing and the Morningstar US Market Index down more than 4.5% for the year, the Magnificent Seven are leading the market lower. Nvidia has fallen more than 20% in 2025, while shares of Tesla have lost an eyewatering 45%. Only Meta has remained in the green for the year.

Figure 2: Magnificent seven performance Jan 1 - March 10 2025. Source: Morningstar Direct

Which Magnificent Seven stocks are buys?

Today, four of the Magnificent Seven are rated 4 stars by Morningstar analysts, meaning they’re considered undervalued: Meta, Amazon, Microsoft, and Alphabet. Alphabet is currently trading at the largest discount (30%).

Tesla has fallen into fairly valued territory after trading in overvalued territory for much of the last six months. Nvidia is also considered fairly valued. Only Apple remains overvalued.

Figure 3: Magnificent seven Star Ratings as of March 10. Source: Morningstar Direct

With more market volatility likely on the horizon, investors should remember that cheaper price tags don’t necessarily mean a stock is a good buy. In the case of Tesla, Morningstar strategist Seth Goldstein says that while shares are now fairly valued, “we recommend investors wait for a larger margin of safety before considering an entry point.” He points to elevated risk for the stock.

And overall, Morningstar strategists still recommend underweighting growth stocks. “We think the rotation into value stocks still has room to run,” says Morningstar chief US market strategist Dave Sekera. “Not only are value stocks more attractively valued, we think the rotation into value will pick up steam as the economy slows and growth stocks’ earnings growth begins to slow.”

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company's future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.