Should Investors Be Worried That the "Magnificent Seven" Make Up 35% of the S&P 500?

A recent Motley Fool research report about the "Magnificent Seven" stocks raises some important and troubling points. Here's a look at its findings.

First, though, some background: If you enjoy keeping up with growth stocks (and perhaps owning a bunch of them), you're probably familiar with popular groupings of them. For example, beginning around 2013, the term "FANG" was coined to represent Facebook (now Meta Platforms), Amazon, Netflix, and Google (now Alphabet).

Image source: Getty Images.

That was soon expanded into "FAANG," to include Apple. And before long, in part because Facebook and Google had changed their names and in part because there were more companies that seemed to belong to the group, it evolved into what we have now: the Magnificent Seven. They are Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla.

The Motley Fool research report's concerning findings

The Motley Fool's research report examined the Magnificent Seven stocks and their relationship to the S&P 500 index, which comprises 500 of America's largest companies (all seven companies are components of the index).

A key finding: "From 2015 to 2024, these seven companies achieved a 697.6% return, outperforming the S&P 500." The S&P gained 178.3% over that same period. This isn't that surprising, because the reason they're so magnificent is that they have grown robustly. Indeed, each of them was recently valued at $1.5 trillion or much more.

What's the problem?

Here's the worrisome part of the report: "The Magnificent Seven represent 34.3% of the S&P 500 as of December 2025, up from 12.3% in 2015."

Again, that shouldn't be too surprising. Since the seven gained so much in value, it makes sense that they would grow to make up a larger portion of the index -- because the S&P 500, like many stock indexes, is market-cap weighted. That means each component's influence on the index is based on its market capitalization -- its total market value.

Here are the recent top 10 components in the S&P 500 -- along with the bottom five. Notice how each is weighted in the index:

Source: Slickcharts.com, as of December 31, 2025.

The table above shows how much more influence those top holdings have compared to the smallest holdings. They're way more influential than even, say, the 25th or 40th largest holdings, which were Home Depot with a weighting of 0.55% and Philip Morris with a weighting of 0.40%.

Why does this matter?

This heavy weighting of the Magnificent Seven stocks matters because many investors are totally unaware of it. You may invest in the S&P 500 index because so many (including The Motley Fool) have recommended it, pleased that your dollars will be spread across gobs of companies. They will, but only pennies will be in many of those companies.

The S&P 500's performance, then, is greatly tied to these prominent holdings. When they do well, the index does well. When they don't, it's the same for the index.

Meanwhile, The Motley Fool research report also said, "The S&P 500 tends to be more resilient than the Magnificent Seven during bear markets." For example, in 2022, when the S&P 500 dropped by 20.4%, the Magnificent Seven fell about twice as hard, down 41.3%.

What can you do?

If you're concerned about these findings and don't want your S&P 500 investments to be heavily concentrated in just a few companies, consider investing in a different type of S&P 500 index fund. The Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP), for example, holds each of its 500-some components in roughly equal proportion. Philip Morris and Home Depot wield roughly the same influence on the fund's returns as Nvidia or Apple.

In soaring years, this equal-weighted fund may not soar as much as a standard S&P 500 fund, but in years when tech giants retreat, it may not drop as much, either.

So think about this issue when you invest for your future. Don't assume that the standard S&P 500 index fund is terrible -- it has served many investors very well for many years. But it does bear some risk due to being overly concentrated on a handful of stocks.

Selena Maranjian has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Microsoft, Netflix, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Home Depot, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom, Match Group, and Philip Morris International and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.