JPMorgan Indicates Valuation Reset for Magnificent Seven May Be Near Completion
JPMorgan Equity Strategy has suggested that the valuation correction affecting the Magnificent Seven—comprising Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla—is nearing its end. The bank notes that these stocks' forward price-to-earnings multiples have dropped to a near one-standard-deviation below their historical median, reaching a 10-year low. This de-rating has occurred alongside broader adjustments in the technology sector. JPMorgan acknowledges some of this valuation decline is justified by increased capital spending and reduced free cash flow due to AI investments but believes earnings strength at these companies will continue to support performance. The bank had previously flagged excessive de-rating earlier in 2026, as investors rotated out of high-multiple names amid geopolitical tensions. Capital expenditures from the largest hyperscalers are projected to reach $725 billion by 2026—up sharply from previous years and nearly equaling their combined operating cash flow. Despite investor concerns over these spending levels, companies like Amazon have raised their capital expenditure forecasts due to strong demand for cloud services.
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Topics: JPMorgan Mag-7 stocks market sentiment valuation reset