The Magnificent Seven big tech stocks have had a phenomenal five-year run…
The S&P 500 is up nearly 80% since 2019, including the bear markets in 2020 and 2022.
But these seven big-tech stocks have all had triple-digit returns.
For instance…
Alphabet (Nasdaq: GOOG) is up over 150%.
Microsoft (Nasdaq: MSFT) is up over 216%.
Tesla Motors (Nasdaq: TSLA) is up nearly 1,300%.
And Nvidia (Nasdaq: NVDA) has beaten them all, up 1,800%.
Right now, these companies are starting to show some signs of slowing down.
Year-to-date, they’ve been all over the board:
Listen, these are great, industry-leading companies. These companies should still beat the market over time.
But from here, it’s hard to see Tesla going up another 1,300% — or getting another 1,800% rally out of Nvidia.
They’ve simply become too large.
For investors who want to make big returns in the future, it’s time for some new leadership…
And to look for the companies that we’ll be talking about as the new Magnificent Seven stocks in the next 5 to 10 years.
Today, we’ll look at how this natural process has played out before … and the key metrics investors can use to find the market’s next Magnificent Seven.
The Past Is Prologue: The Common Trends Behind All Magnificent Stocks
Markets don’t exactly repeat themselves. But they sure rhyme.
Each generation has its version of the Magnificent Seven.
Sometimes it’s more names, sometimes it’s less.
In the 1920s, when homes were being electrified, and new gadgets were hitting mass consumer markets, companies like General Electric and the Radio Corporation of America (RCA) soared.
In fact, RCA shares soared 200-fold before their peak!
In the next market boom of the 1960s, a group dubbed the “Nifty Fifty” became a basket of must-own stocks.
Many of these were centered around the latest aerospace and computer technologies, with individual companies like Xerox soaring 865X!
Finally, in the 1990s, internet companies like Cisco, Qualcomm and Microsoft became synonymous with the tech boom.
As I mentioned a few weeks ago, Cisco was the big winner, soaring over 69,259% in the 1990s.
In each of these cases, investors didn’t decide whether or not to own these stocks.
Rather, they decided how much of each to own.
All these market darling stocks have a few similarities. For starters, they were generally associated with new technologies.
Big market winners come from companies that are at the center of where the economy sees the fastest growth.
Next, when these companies started their run, they weren’t necessarily household names.
However, as the underlying technology became more mainstream, the companies behind those trends became a part of everyday life.
Finally, they had small market caps that could soar significantly higher in the span of a few years.
If we’re starting another generational shift, there are three key things to look for when looking for the big winners that could become the next magnificent Seven:
No. 1: A company that’s AI-focused.
Most or nearly all of the revenue of the next great generational stock should come from emerging technologies.
Today, that’s AI-related applications, pure and simple. We’re still in the early stages of implementing AI technologies, such as AI farming tools.
But there’s far more to come. We’re just scratching the surface of what AI can do to increase productivity.
One estimate puts the opportunity at nearly $15 trillion in additional global GDP by 2030.
That means more opportunities that the right companies can exploit for big profits.
No. 2: It’s still relatively small.
A decade ago, no company had ever had a $1 trillion valuation. Today, three of the magnificent seven stocks do. And over time, more will join the list.
Today’s investors should look for smaller stocks, because that gives them more room to run. For our purposes, let’s use $100 billion as a cutoff.
That’s still plenty large. But companies valued at $100 billion can hit $1 trillion by soaring 10X.
For a company like Nvidia to soar 10X from here, it has to go to over $20 trillion. Given its big run already, that seems unrealistic in just a few years.
But a smaller company could easily soar 10X.
No. 3: An unusual or unique edge.
Of course, not just any company will do. You’ll want to invest in stocks that have unique products or services that competitors can’t touch.
Warren Buffett calls this concept a company’s “moat.”
A moat is simply an advantage that keeps a company going, even when competition attacks it.
In today’s data-driven age, that means patents and copyrights on specific technologies or software.
Today, the moat around data can change quickly, so it’s crucial to work with a company that has a massive edge and a big lead over competitors.
Investors who can find a company that fits into these three categories likely have a big winner on their hands in the years ahead.
With these criteria, you can weed out companies that are too large, not focused on AI and lack the necessary edge to compete successfully.
The Top Future Magnificent Seven Opportunity Today
Money & Markets Chief Investment Strategist Adam O’Dell has just put together research on a company that checks those three criteria.
It’s a company that could genuinely be one of the next magnificent seven plays.
Here’s how it fits in with the three criteria:
No. 1: It’s a company whose AI-related software services are already creating over $600 million in annual revenues. A recent study ranked this company No. 1 in AI, data science and machine learning. That’s exactly the center of the AI revolution.
No. 2: Right now, this company has a market cap of under $50 billion. That means it could soar 20X and become a $1 trillion company in the years ahead. Investors could see every $5,000 invested turn into $100,000.
No. 3: Finally, this company has built a network of government contracts that gives it an edge over other potential AI software plays. That network is backed by over 1,370 active patents that other companies have to pay to use — or go without.
Companies that meet these three criteria are rare. But that’s a big reason why they’ll succeed … and make for the market’s next generation of winners.
Adam O’Dell’s research shows how this next market winner was built by a tech titan, who was one of the original investors in PayPal … and no, it’s not Elon Musk.
Investors who buy now can own a piece of these companies before they become household names like Microsoft, Xerox or RCA once did.
Plus, as these firms grow, they’ll become candidates to replace has-beens in market indices.
That’s another factor that will help push the Dow to 100,000 by the end of the decade.
Adam’s research goes into far more detail on the opportunity to own the next generation of magnificent stocks. However, Adam sees a big change coming on May 5, so you’ll want to act now.
CEO, Banyan Hill, Money & Markets
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