Don't call it a comeback: Why Goldman sees the downtrodden Magnificent 7 roaring back to beat the market

• The market's top tech stocks will outperform the rest of the S&P 500 again this year, Goldman says.
• That prediction comes even as the rest of the index has outperformed the mega-cap cohort this year.
• The top tech stocks are trading closer to attractive valuations again, the bank said.

The stock market's tech titans stumbled in the first quarter, but 2025 will still be another winning year for the Magnificent Seven, Goldman Sachs said.

In a recent note, chief equity strategist David Kostin projected that the mega-cap tech cohort will once again outperform the rest of the S&P 500 in 2025, extending a streak of stellar gains to a third straight year.

"We continue to expect that superior earnings growth will drive the Magnificent 7 to outperform the S&P 493 in 2025, but by a smaller magnitude than in recent years," Kostin wrote. "The share price outperformance of the Magnificent 7 has been tied to their earnings growth outperformance."

It's a take that might seem contradictory to what's transpired so far this year, as trade policy, AI disruptions, and antitrust moves have muddled the outlook for Big Tech.

The group, which includes Nvidia, Tesla, Meta, Amazon, Microsoft, Alphabet, and Apple, is down 5% year-to-date, trailing the 4% gain achieved by the broader index. Some big banks, such as Morgan Stanley, have called on investors to reduce tech exposure.

Ye, despite the slump so far, Kostin noted that mega-cap tech demonstrated earnings outperformance in the first quarter. In 2025, earnings-per-share growth has surged 28% for the Mag Seven, handily outpacing 9% for the S&P 493.

"This magnitude of surprise was the largest since the 2Q 2021 reporting season when the Magnificent 7 beat earnings estimates by 27%," the bank wrote. "Partly as a result of strong 1Q results, consensus 2025 earnings estimates for the Magnificent 7 are roughly in line with where they began the year."

What's more, the top tech stocks are now trading at a discounted valuation, resulting from narrowing earnings growth compared to previous years.

"The relative valuation is the lowest it's been in the last two years," Kostin told Bloomberg TV. "From a starting point of entry, it's actually looking somewhat more attractive at these levels."

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