Alex Dudov
● Charlie Bilello recently pointed out something striking: the Magnificent 7 stocks—Tesla, Meta, Amazon, Google, Microsoft, Apple, and NVIDIA—have hit an all-time high, making up 35.9% of the S&P 500's total value. What's fueling this? The AI boom. But here's the catch: these seven companies only bring in 26.8% of the index's profits, showing a growing gap between how much they're worth and what they actually earn.
● This imbalance is raising eyebrows in Washington. Some lawmakers are pushing for targeted tax increases on big tech firms, saying their massive valuations are distorting the economy. The industry pushes back, warning that sudden tax hikes could hurt smaller suppliers who depend on Big Tech contracts and might even drive talent overseas.
● The numbers tell an interesting story. Tesla represents 2.3% of the index but contributes only 0.2% of profits. NVIDIA weighs in at 8.6% but delivers 4.0% of earnings. If these companies' growth slows down, states relying on their tax revenue could face serious budget shortfalls. Industry groups suggest adjusting overall profit tax rates instead of adding new levies based on headcount or revenue—keeping things tied to actual earnings rather than market hype.
● The stakes are high. Any slowdown in tech hiring would hit personal income tax collections, while shrinking profit margins would reduce corporate tax revenue. With companies like Apple (6.8% weight, 5.2% profit share) and Microsoft (6.6% weight, 4.9% profit share) playing such outsized roles, both policymakers and investors are watching closely.
Alex Dudov
