The Roundhill Magnificent 7 ETF (MAGS) has become a fast-growing ETF this year, helped by the strong performance of most of its constituents. It recently jumped to a record high of $40.37, which was much higher than its all-time low of $30.20. It has also added over $240 million in assets.

Magnificent 7 chart

Companies that make up the Magnificent 7 are the most important ones globally. For example, Microsoft’s Azure, Amazon’s AWS, and Google Cloud run the world. AWS has a market share of 31% while Azure and Google Cloud have 24% and 11%, respectively. 

That means that the three companies control a market share of over 66%. They power the biggest banks, airports, insurance, and transport companies globally. Most notably, they also power the thousands of technology companies in the world. Facebook. 

Anthropic’s Claude runs on AWS while ChatGPT runs on Microsoft’s infrastructure. Google Gemini runs on Google Cloud. Twitter runs on Amazon Web Services. Other companies that rely on these cloud providers are firms like Twilio, CrowdStrike, and Palantir.

The other Magnificent 7 companies have a leading market share. Apple develops the most advanced technology devices while Meta Platforms is the biggest player in the social media industry. Tesla is the biggest company in the EV industry. 

Nvidia, a key part of the MAGS ETF has emerged as the biggest player in the semiconductor industry. It powers all of the top technologies like artificial intelligence, Bitcoin mining, and cloud computing.

Most importantly, these companies are sitting on a mountain of cash in their balance sheet. Data by SeekingAlpha shows that the 7 companies have over $438 billion in cash in their balance sheet. 

Most companies in the ETF are still growing. Microsoft has a forward revenue growth of 12% while Tesla and Meta have a revenue growth of 14% and 16%. 

Still, there are concerns about some of the members. Apple is no longer growing since most people are not replacing their iPhones as they did in the past. Tesla is facing challenges as the EV market becomes saturated. It recently published its worst earnings report in years.

Meta Platforms is also facing substantial challenges. Facebook is often seen as a social media for old people while Instagram’s user base is falling. Instagram is one of the most deleted apps globally. 

Meta Platforms has also struggled to monetize WhatsApp, a company that it bought for billions in 2024. Therefore, I believe that the company will struggle in the next decade as competition from the likes of TikTok rise.

The other concern is that some of the companies are severely overvalued. Nvidia has a forward PE ratio of 38, which holders justify because of its strong growth. Apple has a forward multiple of 26, which is expensive for a company that is not growing. 

The MAGS ETF is often seen as the best ETF that money can buy since it holds the most important companies in the world today. If I were to develop such an ETF, I would handle some other quality companies like JPMorgan (JPM), Visa (V), Mastercard (MA), and even energy companies like ExxonMobil and Chevron.

In addition to the risks mentioned above, there are concerns about the concentration in the technology sector. It does not have direct exposure to other industries like energy, consumer, financials, and utilities. 

Therefore, while the ETF will likely continue doing well, it has some important risks that you should know about.

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