Small-Cap Equities (Russell 2000) Outperform Magnificent 7 Average Amid Reversion to Mean Narrative

This analysis is based on a December 15, 2025 Seeking Alpha report [1] highlighting strength in small-cap equities, framed against a multi-year focus on the Magnificent 7 (AAPL, MSFT, AMZN, NVDA, GOOGL, META, TSLA) and artificial intelligence. Internal performance data [0] shows the Russell 2000 Index gained 6.35%, outperforming the Magnificent 7’s average return of 2.69%. While individual Magnificent 7 stocks had mixed results—with TSLA (+19.35%), GOOGL (+7.37%), and META (+6.74%) posting strong gains—declines in MSFT (-6.84%), AMZN (-4.72%), and NVDA (-4.86%) dragged down the group’s average. This performance reinforces the small-cap strength narrative and aligns with the reversion to mean perspective cited in the original report.

1. Small-cap outperformance challenges the recent dominance of the Magnificent 7, suggesting a potential shift in market leadership dynamics [0].
2. The reversion to mean thesis gains empirical support as small-caps, long out of favor, deliver stronger returns than the large-cap tech average [1].
3. Mixed performance within the Magnificent 7 indicates divergent trends even among top large-cap stocks, rather than uniform underperformance [0].

• Opportunities
  : Investors seeking exposure beyond concentrated large-cap tech may find attractive performance in small-cap equities amid the observed strength [1].
• Risks
  : The trend could reverse if underperforming Magnificent 7 stocks rebound, drawing capital back to large-cap tech. Additionally, small-cap stocks typically carry higher volatility and liquidity risks, which warrant consideration [0].

• Russell 2000 Index (small-cap benchmark) returned 6.35% in the analyzed period [0].
• Magnificent 7 stocks had a mixed average return of 2.69% [0].
• Small-cap strength aligns with a reversion to mean perspective after prolonged underperformance relative to large-cap tech [1].