Wharton School Professor Jeremy Siegel is uncertain whether the “Magnificent Seven” companies can continue to enjoy the run they’ve had, and expects the other sectors could start to outperform. “We have these two markets. We have the Mag Seven, which is ex- Tesla is selling for 30, 35, and then we have the other 493 stocks that are selling more towards 19, which is, to me, very reasonable,” Siegel told CNBC’s “Squawk Box” on Wednesday, referring to the stocks’ valuation on a price-to-earnings basis. “I’ve often talked about 20 as an equilibrium P/E, so it really depends on what happens to that section.” “Is that sector going to be the leader in the next bull market?” he asked. The Mag Seven stocks, which account for roughly one-third of the S & P 500, drove the bulk of the benchmark’s gains over the last two years as investors piled into the artificial intelligence trade. Nvidia alone is up 84% over the last 12 months. But the companies have faltered to start 2025, especially after the unveiling of DeepSeek, a cheaper open-source AI model that raised fears of growing competition. The Mag Seven companies have split into two camps when it comes to performance. Meta Platforms is far and away the winner, up 23% this year, and last posting a 17-day win streak that’s the longest of any Nasdaq-100 constituent going back to 1985. On the other hand, Tesla is down nearly 19%, while Apple is off by more than 7%. META YTD mountain Meta Platforms Siegel said that he will wait to put any money to work on the megacap tech giants, saying he would prefer small- and mid-cap stocks that are at more attractive valuations. “I would be cautious on the Mag Seven,” Siegel said. “I like the other groups. I mean, at 19, I like them, and I know we talked about [it] a long time, and certainly they’ve lagged. You know, you go to mid-cap and you go to small-cap and you go to 15, 14, 13, you don’t need much growth to get a decent return on that.” “As long as the Mag Seven continue, 15, 18, they’ll be the leaders,” Siegel continued. “The question is, now, we see this competition, could bring down margin. Will they be the leaders in the next 12 months? I’d love to be able to give you an answer on that, but I think we just have to wait and see on the data.”
‘We have these two markets’