Market commentary often treats the so-called “Magnificent 7” as a monolith. This year, it’s anything but.

A few days ago, Cameron Crise pointed out that so far, 2024’s more about the “Fantastic Four” than the “Magnificent 7.” Amazon, Meta, Microsoft and, obviously, Nvidia, have done well. Quite well in the case of the latter. On the other hand, Alphabet, Apple and particularly Tesla are an albatross.

“It’s [a] reminder of the execution risk that emerges when valuations get extreme,” Crise remarked. The simplest of simple figures (below) underscores the point.

I should make an Elon Musk joke. But I’ll refrain in the interest of the civility he so often lacks.

Given the above, it’s not surprising that return dispersion among the vaunted 7 is the highest ever, or the highest going back at least a decade.

“On one end of the spectrum, NVDA has returned 87% YTD on the back of its strong Q4 earnings report and sustained investor optimism surrounding AI,” Goldman’s David Kostin wrote, in his latest. And then there’s Tesla which, as noted above, is running on empty (there’s a joke for you).

As the figure above from Goldman shows, the standard deviation of Magnificent 7 quarterly returns has ballooned to 36ppt. That’s well more than double the 10-year average.

It’s tempting to use this as a jumping off point for a long-winded discussion of the implications of falling stock correlations (including within sectors) for volatility, but that’s an article all its own. And I’ve written it before. I’ll write it again this week.

For now, I’ll take the opportunity to ask a simple question: If the Magnificent 7 is to thank for a disproportionate share of benchmark US equity returns, and returns within the Magnificent 7 are increasingly uneven with Nvidia picking up Tesla’s slack, what happens in the event the AI frenzy driving Nvidia skyward abates?

The good news is, stock gains appear to be broadening out. The equal-weighted S&P hit a record last week. That hasn’t happened in two years.