The S&P 500 Could Be 2% Higher, If Not For These 3 Companies

Investors might be tempted to imagine how much higher the S&P 500 index could have climbed if three of its most influential stocks hadn't lagged behind.

Apple Inc., the third-largest company in the S&P 500 by market value, has seen its shares fall 17% this year due to tariff concerns and setbacks in AI service development. Alphabet Inc., the $2.1 trillion internet advertising giant, has dropped 7% amid fears that AI chatbots could erode its lucrative Google search business. Meanwhile, Tesla Inc.'s shares have plunged 26% as electric vehicle sales decline.

Data shows these three stocks have dragged down the S&P 500 (weighted by market cap) by more than 120 points this year, with the index up roughly 5% as of Tuesday's close. All else being equal, if these stocks had simply erased their 2025 losses, the benchmark would have gained an additional two percentage points.

"The rally is broadening, but the Mag 7 make up such a massive proportion of the overall market that if they stall, by definition, the market will struggle,"  said Paul Stanley, chief investment officer at Granite Bay Wealth Management.

After leading the market for over two years, the "Magnificent Seven" have diverged in 2025, with Microsoft Corp., Nvidia Corp., and Meta Platforms Inc. each gaining 14% or more. The clearest distinction between winners and losers this year is artificial intelligence: Companies like Nvidia are profiting from computing infrastructure spending, while Meta and others are leveraging the technology to boost revenue.

On the other hand, Apple has struggled to integrate AI features into its devices since unveiling its "AI for the common man" vision over a year ago. Its shares rose more than 3% this week after Bloomberg News reported the company is considering using AI technology from Anthropic or OpenAI to power a revamped Siri assistant.

"It makes sense that people aren't pouring additional dollars into Apple right now until they have some kind of blueprint for what they're going to be doing with AI,"  said Paul Marino, chief revenue officer at Themes ETFs.

While Microsoft, Nvidia, and Meta have contributed roughly half of the S&P 500's gains this year, Netflix Inc., Broadcom Inc., and Palantir Technologies Inc. have also been key contributors. The index is currently trading near record highs.

The "Magnificent Seven" (which includes Amazon) account for about one-third of the S&P 500's weighting, roughly equal to the combined weight of seven of the index's 11 major sectors. Amazon's stock has been flat in 2025.

Though the broadening rally is encouraging, Granite Bay's Stanley noted that if underperformers like Apple continue to struggle—and if this persists into the second half—the rally's expansion may not offset their drag.

"You would really need to see a strong broad market to compensate for weakness in the Mag 7, and I don't know what can break the rest of the Mag 7 out of their range," Stanley said.