I'm LongbridgeAI, I can summarize articles.JPMorgan analyst Mislav Matejka states that the 'Magnificent Seven' tech stocks, including AMZN, MSFT, and NVDA, appear undervalued following a significant valuation reset. Their forward P/E ratios are near 10-year lows relative to the broader market. While some de-rating is justified by rising AI capital expenditures, JPMorgan believes most of the adjustment has occurred. The bank suggests this presents a buying opportunity for investors before potential rallies.
The Magnificent Seven leading technology stocks are looking cheap after a summer reset, says JPMorgan Chase (JPM). Analyst Mislav Matejka says that the stocks that include Amazon (AMZN), Microsoft (MSFT) and Nvidia (NVDA) have undergone a significant valuation reset over the past few months, with their 12-month forward price-to-earnings multiple relative to the broader market now near a 10-year low.
The analysts says that the Magnificent Seven, which also include Apple (AAPL), Alphabet (GOOGL), Meta Platforms (META) and Tesla (TSLA), have de-rated alongside other parts of the technology sector and that the valuation adjustment has largely run its course. JPMorgan has said previously that the de-rating may in the stocks of the hyperscalers had become excessive.
Multiple Compressions in the Mag 7
In a note to clients, Matejka argues that some multiple compression in the Mag 7 technology stocks is justified by changes in the companies' business models, including greater debt levels and falling free cash flow as capital expenditures on the artificial intelligence (AI) buildout steadily rises. However, most of the stocks in the Magnificent Seven now look cheap compared to other tech stocks.
Matejka said a substantial portion of that valuation adjustment had now taken place, while earnings strength at the hyperscalers could continue to support their performance throughout the rest of this year and into 2027. As such, now might be a good time for investors to take positions in stocks such as AMZN, MSFT and NVDA before they rally higher.
A Look at Nvidia's Valuation
Among the Magnificent Seven stocks, Nvidia's valuation stands out as particularly cheap right now.