A group of US stocks has been driving stock market sentiment over the past year. The collection has been dubbed the ‘Magnificent Seven’ for the scale of share price returns and the number of stocks in it. If I had invested £1,000 equally across a range of companies a year ago, this is how much I would have now.

Better results as a group

For comparison, the basket consists of Nvidia, Tesla, Apple, Amazon, Alphabet, FinishAND Microsoft. Individual company returns over the past year range from -17% for Tesla to 179% for Nvidia. That’s a huge range to deal with!

An equal split between all the shares means my percentage return would be 48.5%. This means my £1,000 would now be worth £1,485. That’s quite an unrealized gain considering that FTSE100 grew only 10% in the same period. Even tech weighty Nasdaq The index rose only 24%.

Key takeaways

One thing that immediately occurred to me is that diversification is key to success. Even though seven stocks aren’t enough to get 100% diversification, it certainly spreads out my risk. For example, let’s say I decided to buy one stock and I decided to Tesla (NASDAQ:TSLA). If that were the case, I would be taking a loss right now.

While the electric vehicle (EV) maker’s stock price has fluctuated over the past year, the trend has been downward. The company has released several disappointing updates for investors, both on its delivery numbers and its financials.

For example, total deliveries in Q2 were down 4.8% compared to the same quarter last year. That may not sound like much, but they grew at an incredible pace throughout 2023. That makes it that much more poignant.

With the much-anticipated robotaxi release being pushed back, and EV demand in China still tender, the stock has struggled to gain traction. But don’t underestimate the influence of the charismatic Elon Musk. His ability to impress shareholders and grow the company is a real asset that Tesla should keep.

A year ahead of us

Of course, the risk of forking out my £1,000 is that I could lose out on large gains. I would be sitting comfortably if I had just gone for Nvidia and ignored the rest.

Looking ahead, I think the returns on Magnificent 7 will be different. I believe Nvidia will continue to grow, but at a much slower pace than last year. Given the market cap and size of the company, it is highly unlikely that another 179% move will occur.

However, I think the group as a whole will continue to move forward. Companies like Apple and Alphabet are clearly showing how to monetize AI. This includes Apple’s latest developer conference, showing off recent AI features in the iPhone. By keeping AI at the forefront of innovation, the stock should continue to gain.

The biggest risk I see is investors rushing to safety. If sentiment turns negative later in the year, these high-growth names will likely bear the brunt of investor concerns.