The market has flourished as the Biden-Harris era nears its end. Despite a sharp downturn in 2022, the S&P 500 has surged by almost 50%. This surge can be largely attributed to the extraordinary gains of the so-called “Magnificent Seven” stocks.
But as the possibility of a Kamala Harris administration looms on the horizon, investors are left pondering – can this winning streak continue? And if so, which stock from the Magnificent Seven is the prime choice in the event of a Harris victory in November?
The Impact of Harris’ Propositions on the Magnificent Seven
Harris has laid out an array of economic measures. An 82-page document from her campaign delineates her vision for creating an “opportunity economy,” with several proposals likely to resonate with the Magnificent Seven.
One noteworthy proposal is to raise the corporate tax rate from 21% to 28%. While a substantial increase, it still falls short of the maximum rate of 39% prevalent before the Trump administration’s tax reforms in 2018.
Another significant proposal is quadrupling the tax on corporate stock buybacks with the aim of stimulating investment in growth and productivity.
Harris also advocates for federal investments in industries crucial for economic and national security, offering tax credits to aerospace, AI data centers, automobile manufacturers, biotech firms, clean energy producers, semiconductor manufacturers, and steel and iron producers.
Assessing the Ramifications of these Proposals
In theory, each member of the Magnificent Seven – Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Tesla (NASDAQ: TSLA) – would be equally impacted by Harris’ proposed corporate tax hike. However, practical effects could diverge among these industry giants.
| Company | Effective Tax Rate |
|---|---|
| Alphabet | 13.9% |
| Amazon | 9.73% |
| Apple | 14.7% |
| Meta Platforms | 17.6% |
| Microsoft | 18% |
| Nvidia | 12% |
| Tesla | (50% Tax Benefit) |
Data sources: Company 10-K filings. *Tesla received more tax benefits than it paid taxes in 2023.
Notably, none of the Magnificent Seven corporations paid the full 21% corporate tax rate. Microsoft and Meta had the highest effective rates among them, yet all adeptly leveraged the tax code to their advantage.
Regarding stock buybacks, most Magnificent Seven companies engaged in significant repurchasing activities. Apple notably led the pack, disbursing a whopping $70.6 billion in buybacks over the nine months concluded on July 1, 2023. Elevated taxes on such transactions might spur recalibrations in capital deployment strategies for Apple and cohorts, albeit unlikely to significantly alter their performance or core operations.
All firms stand to gain from Harris’ proposed tax credits for AI data centers, with Amazon, Microsoft, and Alphabet, as the premier cloud service providers, expected to be primary beneficiaries. Moreover, Nvidia’s fortunes could rise substantially due to its GPUs heavily utilized in AI centers, while Nvidia and Tesla might capitalize on incentives earmarked for semiconductor and automobile sectors respectively.
The Premier Magnificent Seven Stock if Harris Triumphs
The burning question remains – which Magnificent Seven stock is the top pick in a Harris win scenario? Candidly, the available information provides inadequate insights into which stock would optimize the proposed policies of the vice president. Additionally, the actual implementation of her plans post-election remains uncertain, given that the U.S. Congress steers legislative advancement, with the president’s role limited to signing bills into law.
Despite the uncertainties, many economists buoy Harris’ economic strategies as instrumental in curbing inflation, distinct from Trump’s tariff-focused plans that could stoke inflationary pressures. If these forecasts hold true, a Harris administration could herald lower interest rates compared to alternative scenarios.
While all Magnificent Seven constituents stand to gain from a reduced-rate climate, Amazon emerges as a standout choice. With a significant debt burden, Amazon could reap greater benefits from lower interest rates compared to its peers. Additionally, diminished interest rates could amplify consumer and corporate expenditures, propelling Amazon’s e-commerce, advertising, and cloud services enterprises.
Irrespective of the White House incumbent for the ensuing quadrennium, Amazon is poised to profit from a trajectory shift in IT expenditure towards the cloud from on-premises setups. This migration is set to accelerate in tandem with advancements in artificial intelligence.
Curiously, Amazon’s stock has only ascended approximately 12% during Harris’
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Seize the Moment
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