How Much Further Can the "Magnificent Seven" Fall? Here's What History Suggests.

Just weeks after approaching its all-time high, the Nasdaq Composite is tumbling. As of Tuesday morning, the tech-heavy index was down by about 15% from its peak, putting it well into correction territory.

Concerns about new tariffs, weakening consumer sentiment, geopolitical tensions, and a stock market that was already trading at lofty valuations have investors playing defense, selling stocks, and wondering how long this pullback will last.

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The members of the "Magnificent Seven" -- the much-watched group of tech megacaps comprised of Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Nvidia (NASDAQ: NVDA), Meta Platforms (NASDAQ: META), and Tesla (NASDAQ: TSLA) -- have almost all fallen even further. Those giants are down by an average of 25% from their 2025 peaks. Only one has fallen less than the Nasdaq -- Apple.

MSFT data by YCharts.

Why the Magnificent Seven is getting hit harder than the overall tech sector

In a market-wide sell-off, it's often the growth stocks that enter the correction carrying lofty valuations that get hit the hardest. Those tend to be the stocks that were among the biggest winners in the preceding bull market, and investors' fears around a weakening economy and a bear market tend to prompt profit-taking. Additionally, those big gainers often have cyclical exposure, and when the macroeconomic headwinds start to pick up, they are apt to be viewed as having become overvalued.

While investors have grouped these seven tech stocks together due to their massive sizes and influence on the market as a whole, their businesses are quite different from one another, and they mostly operate in different subsectors of the tech industry. Therefore, they have differing levels of sensitivity to things like tariffs or inflation.

As this correction progresses, it makes sense to look back on recent history to see what investors should expect.

What history shows about stock market sell-offs and the Magnificent Seven

The last major sell-off in the tech sector and the broad market came in 2022 after the economic reopening sent a number of tech stocks plunging as investors realized that factors that supported their excess growth through the pandemic were temporary. Revenue slowed dramatically at a number of big tech companies, including Amazon, which saw its e-commerce and cloud computing business fade, and Alphabet and Meta Platforms, whose digital advertising businesses decelerated as consumers shifted more of their shopping back to brick-and-mortar commerce and brand owners slashed their marketing budgets in fear of a potential recession.

The Magnificent Seven stocks all fell sharply during that period.

MSFT data by YCharts.

Four of them -- Nvidia, Meta, Amazon, and Tesla -- saw tumbles of 50% or more at one point from where they were at the start of 2022, while Microsoft and Apple slid more than 25%, and Alphabet was down by more than 40%.

Again, five of the seven had noticeably worse performances than the overall Nasdaq Composite, though that makes sense as these stocks were generally big gainers during the pandemic.

The lesson for investors

Any stock can head lower at any time. There's always room for the news to get worse, or for an unforeseen event to occur. In the current sell-off, it's certainly possible that any of the Magnificent Seven stocks could fall by 50% or more. If signs of a recession start to mount, a steeper market sell-off is likely, and it will worsen once the economic headwinds start showing up in earnings reports.

However, the more important lesson to take away here isn't that bear markets can be deep. It's that elite companies almost always rebound from these temporary shocks. All of the Magnificent Seven stocks rebounded from their 2022 plunges to set all-time highs in 2023 and 2024, and as a whole, they greatly outperformed the Nasdaq Composite during those two years, paying off for investors who held on through the bear market.

While it's nerve-wracking for investors to watch the value of their stocks continue to fall, broadly speaking, staying the course is the best action to take. No one knows how long this drawdown will go on nor how deep it will be at its nadir, but the shares of high-quality businesses are likely to return to new all-time highs in the next bull market and continue to reward long-term investors.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.