Domestic growth stocks have experienced 2025 headwinds. Those equities include the Magnificent Seven. These headwinds largely stem from the off-and-on tariff policy laid out by the Trump Administration.
While that’s been an obvious drag ETFs such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), there are some silver linings. Those include that the risk-induced repricing experienced by previously glamorous mega-cap growth equities, including QQQ/QQQM holdings, could represent opportunity.
That’s pertinent because the Magnificent Seven combine for more than 40% of the QQQ/QQQM rosters. Indeed, the setbacks endured by those stocks are understandable. As J.P. Morgan Asset Management points out, 75% of Magnificent components suppliers are located overseas. Many are in countries that are on the White House tariff list. Not only that, but QQQ/QQQM holdings such as Alphabet (GOOGL), Apple (AAPL), and Microsoft (MSFT) rely on ex-US markets for more than half their sales.
Inklings of Hope for Mag 7, QQQ
QQQ is down 10.38% YTD, and some of its marquee holdings are sporting worse 2025 losses than that. So it’s understandable market participants are leery of venturing into mega-cap growth at the moment. However, it pays to see the forest through the trees. That’s because the magnificent seven aren’t fundamentally damaged. But they are attractively valued relative to recent history.
“So far, the pullback hasn’t been triggered by collapsing fundamentals, but a repricing of risk. Investors are reassessing margins, capex and earnings potential in a more uncertain [environment. And] valuation compression has followed,” noted J.P. Morgan’s Stephanie Aliaga. “The forward P/E ratio for the Mag 7 has declined to ~22x from 31x at the start of the [year. That marks] the cheapest levels since January 2023—before the AI investment theme even gained traction.”
Over the near term, investors considering getting back into the Magnificent game or adding to positions in those stocks or ETFs like QQQ and QQQM may need to reconcile that trade issues are likely to persist over the coming months.
Obviously, tariffs cannot be ignored. But neither can the point that the Magnificent Seven and related companies – plenty of which also dot the QQQ/QQQM portfolios – are innovation drivers. Plus, compelling fundamentals continue underpinning the AI thesis.
“The mega-cap tech companies remain at the forefront of [innovation. But] they are not a monolith and remain highly exposed to global policy shocks,” concluded Aliaga. “For investors, the playbook isn’t to abandon the cohort, but to manage your exposure, protect portfolios against downside risk and keep an eye on where leadership is headed [next. As] beyond the trade headlines, AI advancement is rapidly progressing.”
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