Magnificent Seven Burns Short-Sellers as Goldman Banks on a Comeback

The Magnificent Seven, like their namesake in the 1960 movie, saved the village – aka Wall Street – in 2024, and, as in the original, the cost to the group has been high. 

The Roundhill Magnificent Seven ETF — which offers equal exposure to Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla — is down nearly 7% this year. But reports last week showed how betting against these titans could go painfully wrong.

Comeback in Business

There’s little mystery behind the Magnificent Seven’s choppy start to 2025. The companies have been weighed down by an unholy economic trinity: tariffs, AI disruption, and antitrust claims.

In the case of tariffs, Apple and Amazon, in particular, are exposed to levies on supply chains in Asia, set to kick in via the Trump administration’s “reciprocal” tariffs in the coming weeks. In the case of AI disruption, a breakthrough by Chinese AI startup Deepseek raised the appeal of Chinese tech firms, which trade at lower price-to-earnings ratios than their US counterparts: Goldman Sachs analysts wrote in a note last week that hedge funds cut their Magnificent Seven exposure in the first quarter while upping their exposure to US-listed Chinese companies, with Alibaba, Baidu, and PDD among the most popular. Finally, in the case of antitrust, Meta and Alphabet are facing heated scrutiny from regulators in the US and Europe: In March, for example, the Department of Justice called on Alphabet’s Google to separate its search and advertising businesses.

On the other hand, it takes more than one, two, or even three punches to bring down a heavyweight, which analysts have been careful to note:

• Following a $1 trillion wipeout after Trump’s April 2 “Liberation Day” announcement of global tariff plans, the Magnificent Seven have recovered their losses and even outperformed the broader market in the past month: The Roundhill Magnificent Seven ETF is up 16.7% and the S&P 500, which has also recovered from a Liberation Day selloff, is up 7.8%. An analysis by S3 Partners found that investors who bet against US stocks saw the value of their short positions fall $257 billion from April 8 to May 20, with the Magnificent Seven driving a disproportionate $35.8 billion of the change.
• In another Goldman note last week, the bank’s analysts wrote they “expect that superior earnings growth will drive the Magnificent 7 to outperform the other 493 stocks in the S&P in 2025, but by a smaller magnitude than in recent years. They pointed out that earnings-per-share growth in 2025 has soared 28% for the Mag Seven, compared to just 9% for the S&P 493.

Back to Square One: Goldman noted that because of the group’s earnings overperformance, which it said was the largest since 2021, consensus 2025 earnings estimates “are roughly in line with where they began the year.” As the short-sellers who saw their positions eroded learned, you bet against markets at your peril. Or as S3 Partners’ Ihor Dusaniwsky put it: “Shorts felt like Marie Antoinette after Bastille Day when looking at their post-Liberation Day profit & loss statements.”