There’s been a noticeable uptick in investments in AI this year, and several leading tech stocks are reaping the benefits.
Investing in high-growth stocks can often be the key to financial success. The so-called “Magnificent Seven” stocks—alphabet, apple, Amazon, meta platforms, Microsoft, Nvidia, and Tesla—are synonymous with growth. These major companies usually serve as indicators of the broader market health these days.
As of 2025, the S&P 500 is having a solid year. The Round Hill Magnificent Seven ETF has actually outperformed it, boasting a roughly 21% increase since the start of the year, while the S&P 500 saw only a modest 14% rise.
The pressing question, of course, is whether this fund is still a sound investment at its current valuation or if it might be time to explore alternatives.
Reasons to consider investing in the Magnificent Seven ETF
Though the Magnificent Seven stocks might face declines during market corrections, they have shown potential for long-term growth. These companies are strong contenders and have proven their worth. While they may experience downturns, their overall track record suggests they are resilient.
Looking back over the past five years, all of these stocks have been trending positively. Even Amazon, the underperformer among them, has risen about 47%. Meanwhile, Nvidia has been a standout, achieving over 1,100% in returns.
Staying invested in the Round Hill ETF, which follows these top tech stocks, can be a straightforward approach to participating in the ongoing growth in AI and technology. These companies have solid financials and are generally good options for long-term holding. The convenience of an ETF that gives you exposure to all of them simultaneously is a significant advantage.
Exploring alternative investment strategies
It’s important to recognize that just because a company is strong doesn’t guarantee its stock is a good investment, regardless of its price. Take Palantir Technologies as an example. This data analytics firm has shown tremendous growth, yet its stock price soars over 400 times its earnings.
No matter how promising a company might be, it’s crucial to consider its valuation before investing. Ignoring this aspect can lead to missed profits—or worse, significant losses—both in the short and long term.
By continuously investing in the Round Hill ETF, you run into the risk of high-priced stocks affecting your overall returns. As evidenced by current price-to-earnings ratios, several of these stocks are trading above 50.
Moreover, I’d argue Apple’s growth rate tends to hover in the single digits, so paying more than 35 times earnings seems excessive.
While not every stock in the Magnificent Seven is egregiously overvalued, some may still drag down your returns. Therefore, instead of simply choosing the Round Hill ETF, it might be wise to explore other value stocks. Yes, it could demand more research, but such diligence often pays off.
My approach to the Magnificent Seven
Despite the solid performance of the Round Hill Magnificent Seven ETF this year, it’s also important to keep in mind its vulnerability to market corrections, particularly given the high valuations of some of its holdings.
Honestly, I don’t see a strong reason to invest in an ETF that focuses solely on these seven stocks. This isn’t a diversified fund with hundreds of options that would save you time while searching for good investments. Plus, by investing in individual stocks, you can selectively target those that seem less overvalued.
While buying into some of the Magnificent Seven could still be a smart strategy—especially if you choose stocks that aren’t overly priced—I personally don’t plan on owning the entire set. That’s why I’m opting out of the Round Hill ETF, despite its impressive performance this year.
