The so-called “Magnificent Seven” tech giants still dominate the S&P 500’s market value. However, many managers of actively managed mutual funds are shifting their focus. They see better growth and value opportunities outside this group, especially in financial and healthcare sectors.
A recent Goldman Sachs analysis looked at 541 large-cap active mutual funds managing $3.5 trillion in assets. It found that in the first quarter of 2025, fund managers held fewer shares of major tech stocks compared to their benchmark indexes.
Apple and Nvidia showed the largest underweights. Funds held only 3.3% in Apple versus a 6.3% benchmark, and 3.6% in Nvidia versus 5% in the benchmark. Other Magnificent Seven stocks like Microsoft, Tesla, and Alphabet were also underweighted, ranking among the top 10 most underheld stocks. Broadcom, a major chipmaker, was similarly underweighted.
This cautious stance on tech has paid off. Several Magnificent Seven stocks have fallen sharply this year—Apple is down over 20%, Tesla over 15%. Cutting back on tech helped about half of actively managed large-cap funds beat their benchmarks in 2025, a better performance than the historical average of 37%, according to Goldman.
Interestingly, Warren Buffett’s Berkshire Hathaway is also underweighted in many tech stocks, including Apple, its largest holding. Despite this, Berkshire’s shares have risen more than 10% this year.
Instead, fund managers are overweight in value stocks, especially banks and financial firms. Wells Fargo leads the overweight list, followed by Bank of America. Payment companies Visa and Mastercard also feature prominently. These stocks, many owned by Berkshire, have benefited from hopes of Federal Reserve rate cuts, increased merger activity, and deregulation prospects. The Financial Select Sector SPDR ETF has gained nearly 4% so far in 2025.
Healthcare stocks are another focus. Fund managers favor companies like medical device maker Medtronic and insurer Cigna, both of which have delivered positive returns this year. However, not all healthcare bets have succeeded. UnitedHealth Group, once a top performer, has plunged over 40% recently due to earnings concerns and management changes. It went from the best Dow Jones stock earlier this year to its biggest loser.
This rapid shift highlights how quickly momentum can change on Wall Street. Active fund managers must stay flexible to navigate these fast-moving markets.
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