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With geopolitical tensions simmering down ever so slightly versus March's hysteria, investors are back on the hunt for attractively valued companies with strong earnings growth potential.

That mission is likely to lead them back to the Magnificent Seven.

Fresh analysis of S&P 500 earnings estimates by Morgan Stanley underscore the point. Net income growth for the Magnificent Seven is expected to not only accelerate in the first three quarters of this year, it's poised to sharply outpace the rest of the S&P 500. The S&P 493 will be unlikely eclipse the Mag 7 in terms of earnings growth until the fourth of this year, given tougher comparisons to 2025 for the tech giants.

Mag Seven net income is estimated to grow 25% in 2026 compared to 11% for the S&P 493. The relative outperformance on net income is expected to stretch into 2027, Morgan Stanley notes.

The Magnificent Seven is a group of high-performing, mega-cap US tech stocks that have dominated the market’s returns since 2023. They include: Apple (AAPL), Nvidia (NVDA), Amazon (AMZN), Google (GOOG), Microsoft (MSFT), Meta (META) and Tesla (TSLA).

Investors appear to be rallying around the notion, again, that this is a tech or bust market, largely due to strong profit potential.

Investors have pivoted aggressively from defensive oil and gold positions back into the AI supercycle trades, bolstered by Taiwan Semiconductor's (TSM) strong earnings and a stronger outlook for AI demand last week.

The report proved the sector’s fundamental growth remains unbreakable despite geopolitical volatility.

Amazon has also been a strong performer the past month as investors bet its AWS business will be lifted by exposure to demand from key customer Anthropic (ANTH.PVT).

The average gain for a member of the Magnificent Seven complex is 11% over the past month, with the largest increase at 20% for Amazon.

"Recent data points suggest an even faster acceleration of AI capabilities than we expected," Morgan Stanley strategist Sam Coffin said in a note.

Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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