Is Mega-Cap Tech Making a Comeback?

The Daily Breakdown takes a look at the rebound in tech, specifically within the Magnificent 7, as this group is powering the recent rally.

Before we dive in, let’s make sure you’re set to receive The Daily Breakdown each morning. To keep getting our daily insights, all you need to do is log in to your eToro account.

Friday’s TLDR

Tech lagged badly in Q1
But it has led the recent rally

What’s Happening?

At one point, tech was one of the worst-performing sectors in the S&P 500 this year, down more than 10%. While tech is still down on the year — lower by about 1.5% — it’s no longer scraping the bottom of the sector-performance barrel. 

(Unfortunately, that belongs to the energy, healthcare, and consumer discretionary sectors, all three of which are down about 5% so far in 2025). 

The rebound in tech can be attributed to the Magnificent 7. With the exception of Apple, every holding in the Mag 7 is outperforming the S&P 500 over the past month — and remember, about 30% of the S&P 500 is tech. 

Nvidia, Tesla, Microsoft and Meta have been major leaders amid the recent rally, particularly Microsoft and Nvidia given their size (with a combined market cap of more than $6.6 trillion). 

The year-to-date readings are a little lumpy, highlighting the tough performance from this group in Q1, while the one-year performance is mixed; a combination of massive outperformers, and a few mild under-performing stragglers. 

The data doesn’t tell the whole story, either. 

For instance, TSLA remains nearly 30% below its record high, nearly twice as much as the next worst-performer by that metric — Alphabet. In fact, five of the Mag 7 components are down more than 10% from their record highs, while the S&P 500 is down a little less than 5% from its record.  

The Bottom Line: It’s been a tough stretch for mega-cap tech, both in Q1 2025 and when we look back over the past few quarters (note: only three Mag 7 names have outperformed the S&P 500 over the past year). 

Like the overall market, these stocks are prone to volatility. However, if this group maintains momentum, it’s possible that the Magnificent 7 still has room to the upside given that many are still down notably from their highs. And if they continue to rally, this group could very well buoy US stocks, given their outsized weighting in the indices.

Want to receive these insights straight to your inbox?

Sign up here

The Setup — Amazon

The one stock we didn’t mention above? Amazon. And interestingly, its chart really stands out. That’s as shares have enjoyed a strong rebound from the recent lows, up about 25%, but have since pulled back to find support near $200. 

Not only is $200 a key technical area on the charts — having served as both support and resistance in the past — but it’s near where the 200-day moving average also comes into play. 

Amazon was in focus on Thursday on reports that Bill Ackman’s Pershing Square acquired a position in the stock. 

While Amazon has done great lately, consider just how far the stock fell from its high in Q1. In fact, shares are still down more than 16% from the highs. 

Bulls want to see the stock hold nearby support (~$200 and the 200-day). If AMZN can do that, investors will hope for more upside in the coming weeks. If support doesn’t hold, more downside is possible. 

It’s important to note that, just because support holds, doesn’t necessarily mean AMZN will hurry back to record highs. Nor does it mean that failure to hold this level will send shares back to the recent low. The $200 area is just one spot on the chart for active investors to keep an eye on. 

Options

This is one area where options can come into play, as the risk is tied to the premium paid when buying options or option spreads. 

Bulls can utilize calls or call spreads to speculate on a rebound, while bears can use puts or puts spread to speculate on more downside should support break. 

For those looking to learn more about options, consider visiting the eToro Academy.

Disclaimer:

Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.