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Mag-7 stocks fell by 5% in Mar26 (Feb26: -6.7%), underperforming both the S&P 500 (-4.7%) and NASDAQ (-0.2%). The decline was driven by the escalation of the US-Iran war, surging oil prices raising data centre cost concerns, and landmark social media court rulings in late March. META (-11.7%) was the weakest after losing two high-profile court cases, compounding investor unease over its 2026 capex guidance.
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The US-Iran war drove a ~31% surge in oil prices and triggered a broad risk-off selloff that hit the Mag-7 harder than the wider market, but we see the decline as driven by investors de-risking their portfolios rather than fundamental. The incoming mega-IPO wave (SpaceX, OpenAI, Anthropic) poses limited near-term rebalancing risk given the small expected float, and validates Mag-7's AI spending, as these trillion-dollar businesses are built on its infrastructure.
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We maintain OVERWEIGHT on the Mag-7. The Mar26 selloff, driven by the US-Iran war, surging oil prices and adverse court rulings, has pushed valuations to their most attractive levels in over a decade, at 22x forward PE. Net cash balance sheets, robust free cash flow and long-term energy agreements insulate the group from near-term cost pressures, while accelerating AI monetisation and resilient cloud demand continue to underpin earnings growth that outpaces the broader market. Excluding TSLA, Mag-7 earnings will continue to outpace the S&P 500 and Nasdaq 100, anchored by non-cyclical demand and the US AI Action Plan.
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