Introduction
What happens to the S&P 500 without Magnificent 7 stocks if those companies are removed and the remaining constituents are rebalanced back to 100%?
Since the start of 2023, the S&P 500 has delivered a very strong price return. But a large part of that performance has been driven by a small group of mega-cap technology and growth companies: Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Alphabet Class A (GOOGL), Alphabet Class C (GOOG), Meta Platforms (META) and Tesla (TSLA).
In this post, I use open-spx to create a rebalanced synthetic version of the S&P 500 without Magnificent 7 stocks. The goal is educational: to better understand how much these companies contributed, how concentrated the index became, and how the rest of the market performed when treated as a fully invested portfolio.
This is not investment advice, and it is not a recommendation to buy or sell any stock, index product or ETF. The analysis is based on price returns only, not total returns, so dividends are not included.
The setup
The previous post on this site explained how open-spx can be used to estimate S&P 500 return contributions from constituent-level prices and inferred weights. In this post, I extend that idea by creating a synthetic index.
The S&P 500 without Magnificent 7 experiment is a counterfactual index construction exercise. It does not ask whether the excluded companies are good or bad investments. Instead, it asks a narrower question: how would the S&P 500 have behaved if those stocks were removed and the remaining constituents were scaled back to a full 100% allocation?
The workflow is:
- Run a regular S&P 500 replication.
- Estimate the constituent weights through time.
- Remove the excluded tickers.
- Rebalance the remaining weights back to 100%.
- Compute a new synthetic price-return series.
- Reuse the same contribution analysis on the residual index.
For this experiment, the excluded tickers are:
NVDA— NvidiaAAPL— AppleAMZN— AmazonMSFT— MicrosoftGOOGL— Alphabet Class AGOOG— Alphabet Class CMETA— Meta PlatformsTSLA— Tesla
There are eight tickers because Alphabet appears through two share classes: Alphabet Class A (GOOGL) and Alphabet Class C (GOOG). In the charts these are shown separately.
The displayed period is 2023-01-04 to 2026-06-15, using the first available trading observation in the dataset.
A simplified version of the command is:
open-spx --start 2023-01-01 \
--end 2026-06-15 \
--exclude-tickers NVDA,AAPL,AMZN,MSFT,GOOGL,GOOG,META,TSLA \
--synthetic-name ex_mag7
The requested start date is 2023-01-01, but the first available trading date in this run is 2023-01-04.
How the synthetic ex-Magnificent 7 index is constructed
The construction is straightforward.
At every point in time, open-spx starts with the inferred S&P 500 constituent weights. It then removes the excluded tickers and rescales the remaining weights so that the residual universe sums to 100%.
The formula is:
new weight = original weight / sum of remaining weights
For example, if the Magnificent 7 represent 36% of the index on a given date, the remaining stocks represent 64%. The residual stocks are then scaled by:
1 / 0.64 = 1.56x
This is the key mechanical detail. The synthetic index is not the S&P 500 minus the Magnificent 7 with the removed weight held in cash. Instead, the removed weight is reallocated to the remaining S&P 500 constituents.
That distinction is essential for interpreting the results.
S&P 500 without Magnificent 7 versus the full index
The first chart compares three series, all normalized to 100 at the start:
- the S&P 500 price index,
- the replicated S&P 500,
- and the rebalanced ex-Magnificent 7 synthetic index.
From 2023-01-04 to 2026-06-15, the S&P 500 price index increased by about 96%. The replicated S&P 500 closely tracks it, also ending around 96%.
The ex-Magnificent 7 synthetic index returned about 61%.
That is a lower return, but it is still a strong positive result. The main message is not that the Magnificent 7 did not matter. They clearly did. The message is that the rest of the S&P 500 still delivered meaningful returns when treated as a fully invested portfolio.
In other words, the S&P 500 without Magnificent 7 lagged the full index, but it did not collapse. The residual market still compounded strongly.
How much did the Magnificent 7 contribute to the S&P 500?
The excluded Magnificent 7 tickers contributed about 37 percentage points to the S&P 500 price return over this period.
Nvidia (NVDA) was the largest contributor, adding about 11 percentage points. Apple (AAPL) contributed about 6 percentage points. Amazon (AMZN) and Microsoft (MSFT) each contributed about 4 percentage points. Alphabet Class A (GOOGL), Alphabet Class C (GOOG), Meta Platforms (META) and Tesla (TSLA) each contributed about 3 percentage points when rounded to whole percentages.
Together, these excluded tickers contributed about 37 percentage points. Relative to the S&P 500’s approximately 96% price return, that means the Magnificent 7 represented roughly 39% of the index return in this run.
That is a large number. It confirms that recent S&P 500 performance was highly dependent on a small group of mega-cap companies.
It also explains why the S&P 500 without Magnificent 7 performed differently from the original index. The excluded companies represented a large share of total return contribution.
Why the S&P 500 without Magnificent 7 is not just subtraction
The bridge chart shows the central result of the experiment:
- S&P 500 cumulative price return: about 96%
- Ex-Magnificent 7 synthetic return: about 61%
- Raw excluded contribution: about 37 percentage points
- Return reduction from exclusion: about 35 percentage points
At first glance, this might look surprising. If the Magnificent 7 contributed 37 percentage points, why does the synthetic index lag by 35 percentage points?
The answer is rebalancing.
This is the most important mechanical detail in the S&P 500 without Magnificent 7 analysis. The excluded weight is not moved to cash. It is reallocated across the residual S&P 500 universe.
When the Magnificent 7 are removed, their weight is redistributed across the remaining constituents. Those companies receive a larger portfolio weight than they had in the original capitalization-weighted index.
So the ex-Magnificent 7 index is not simply:
S&P 500 return - Magnificent 7 contribution
Instead, it is:
S&P 500 without Magnificent 7, with the remaining stocks scaled back to 100%
That is why the return reduction is smaller than the raw contribution of the excluded stocks.
The contribution did not arrive in a straight line
The Magnificent 7 contribution was not smooth.
The cumulative contribution rose strongly in 2023 and 2024, pulled back at several points, and then continued to rise into 2025 and 2026. Nvidia (NVDA) stands out as the largest individual contributor, while the other names contributed more gradually.
This matters because concentration risk is not only about the final number. It is also about the path.
A portfolio that becomes increasingly dependent on a narrow set of companies can perform very well when those companies lead. But it may also become more vulnerable if leadership reverses.
Concentration increased over time
The inferred combined weight of the excluded Magnificent 7 tickers increased significantly over the period.
At the start of the sample, the excluded group represented roughly one-fifth of the replicated S&P 500. By later in the period, it represented roughly one-third of the index. At some points, the excluded group represented more than one-third of the replicated S&P 500.
This is the core concentration-risk issue.
The S&P 500 contains hundreds of companies, but it is market-cap weighted. When a small group of companies becomes very large, a broad-market index can become increasingly exposed to the same few names.
That does not make those companies bad investments. Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL and GOOG), Meta Platforms (META) and Tesla (TSLA) are major companies with major economic importance. But it does mean that investors using the S&P 500 as broad-market exposure should understand how concentrated that exposure can become.
A simple rebalance example
The rebalance mechanics chart shows a point-in-time example.
On the selected date, the excluded Magnificent 7 tickers represented about 36% of the index. The residual universe represented about 64%. After removing the excluded tickers, the remaining weights were scaled back to 100%.
In this example, the residual weights were multiplied by about 1.55x.
This is the mechanical reason why the ex-Magnificent 7 index can still compound strongly. The remaining companies are not left at their original reduced weights. They become the whole portfolio.
Relative performance: when did the ex-Magnificent 7 index lag?
The ex-Magnificent 7 synthetic index lagged the S&P 500 over the full period, but relative performance varied across shorter windows.
The cumulative excess return line was mostly negative, meaning the synthetic index generally trailed the original S&P 500. However, the rolling return differences show that this underperformance was not constant.
There were periods where the ex-Magnificent 7 index performed closer to the S&P 500, and some shorter windows where it performed better.
This is a useful reminder that market leadership changes over time. The Magnificent 7 dominated much of the period, but not every month and not every quarter looked the same.
Did removing the Magnificent 7 reduce drawdowns?
A common assumption is that reducing concentration should automatically reduce risk. The drawdown comparison is more nuanced.
The ex-Magnificent 7 synthetic index does reduce exposure to mega-cap technology and growth stocks. However, its realized drawdowns were not always smaller than the original S&P 500 over this sample. In some periods, the ex-Magnificent 7 index had comparable or even larger drawdowns.
This is important for interpretation.
Lower concentration does not guarantee lower realized volatility or smaller drawdowns in every market environment. It reduces one type of risk: dependence on a small group of mega-cap companies. But the residual universe has its own risks.
A less concentrated portfolio can still decline.
What drove the residual index?
After removing and rebalancing away from the Magnificent 7 the top residual contributors were led by Broadcom (AVGO), Micron Technology (MU), Eli Lilly (LLY), Advanced Micro Devices (AMD) and Walmart (WMT).
Broadcom (AVGO) was the largest residual contributor, followed by Micron Technology (MU). Eli Lilly (LLY) and Advanced Micro Devices (AMD) also made large positive contributions. Walmart (WMT), JPMorgan Chase (JPM), Intel (INTC), RTX (RTX), Oracle (ORCL) and Lam Research (LRCX) were also among the important contributors.
This is one of the more interesting parts of the experiment.
When the Magnificent 7 are removed, the residual S&P 500 is not empty. Other large companies and sectors still contribute meaningfully.
The ex-Magnificent 7 result is therefore not a “no growth” portfolio. It still includes semiconductor companies, healthcare companies, financials, industrials, retailers and other large businesses.
Which companies detracted?
The largest residual detractors included Pfizer (PFE), Marsh & McLennan (MMC), UnitedHealth Group (UNH), Nike (NKE), Moderna (MRNA), United Parcel Service (UPS), PepsiCo (PEP), Estée Lauder (EL), Bristol Myers Squibb (BMY) and MSCI (MSCI).
These detractors were much smaller in absolute contribution than the largest positive contributors. For example, the largest negative contribution in the residual index was roughly half a percentage point.
This asymmetry is useful. The residual index’s positive return was not driven by an absence of losers. There were still detractors. But the positive contributors outweighed them.
What this means for investors
The experiment suggests three main takeaways.
First, the Magnificent 7 mattered enormously. Over this period, Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Alphabet Class A (GOOGL), Alphabet Class C (GOOG), Meta Platforms (META) and Tesla (TSLA) together contributed about 37 percentage points to the S&P 500.
Second, the rest of the market still performed well. After removing those tickers and rebalancing the remaining S&P 500 constituents, the synthetic index returned about 61%.
Third, concentration risk is real, but it should be described carefully. Removing the Magnificent 7 would have reduced exposure to the dominant mega-cap stocks, but it would also have reduced returns over this period.
The benefit is not that the ex-Magnificent 7 index was better in hindsight. It was not. The benefit is that it was less dependent on a small set of companies.
That may be valuable in scenarios where:
- market leadership broadens,
- mega-cap valuations compress,
- technology leadership weakens,
- or investors want less dependence on the same few names.
But it may hurt in scenarios where the Magnificent 7 continue to dominate index returns.
This is why the experiment is best understood as an educational concentration-risk study, not as a trading recommendation.
Limitations
There are several important limitations.
First, this is a price-return analysis. Dividends are not included.
Second, the weights are inferred. They are not official S&P Dow Jones Indices constituent weights.
Third, the analysis depends on data quality, ticker mapping, corporate actions and the available constituent history.
Fourth, this is a counterfactual index experiment. It does not include trading costs, taxes, slippage, liquidity constraints or product implementation details.
Fifth, the result depends on the chosen date range. A different starting point or ending point could produce different conclusions.
Finally, Alphabet Class A (GOOGL) and Alphabet Class C (GOOG) are treated separately because they are separate listed tickers in the dataset, even though they represent the same company.
Conclusion
From 2023-01-04 through 2026-06-15, the S&P 500 price index returned about 96% in this run. The replicated S&P 500 closely matched that result. The Magnificent 7 contributed about 37 percentage points, or roughly 39% of the index return.
When those tickers were removed and the remaining S&P 500 constituents were rebalanced back to 100%, the synthetic ex-Magnificent 7 index still returned about 61%.
That is the key result.
The Magnificent 7 were extremely important. But the rest of the S&P 500 was not irrelevant. A rebalanced residual universe still produced a strong return.
The S&P 500 without Magnificent 7 is therefore best understood as a concentration-risk experiment. It shows how much the index depended on a small group of companies, while also showing that the residual market still delivered meaningful returns.
For investors, the lesson is not that one version is obviously better than the other. The lesson is that index construction matters. A market-cap-weighted index can become highly concentrated, and understanding that concentration is essential when interpreting broad-market returns.
Related links
The S&P 500 is maintained by S&P Dow Jones Indices.
This experiment uses price-index style analysis rather than official total-return index methodology. More information about S&P Dow Jones Indices methodology is available from S&P Dow Jones Indices methodology resources.
The code used for this experiment is available in the open-spx project on GitHub.