GRANOLAS is an acronym coined by Goldman Sachs during the first European lockdown in 2020 to represent the largest European companies by market capitalization at the time.
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Amid rising geopolitical tensions, large-cap stocks continue to perform well in 2024. The Euro Stoxx 50 rose 9%, while the US Top 100 rose 19%. The European elite stocks GRANOLAS returned an average of 16.6%, while the US Magnificent Seven returned twice as much, 38%, driven by Nvidia’s AI rise.
After posting strong performance in 2023, large cap stocks across the globe are poised to continue to perform well in 2024, providing a safe haven for investors amid ongoing geopolitical tensions and economic uncertainty.
The Euro Stoxx 50 index, which is made up of the 50 largest European companies, has risen 9% since the beginning of the year, while the index of the 100 largest U.S. companies has surged 19%.
Notably, both indexes outperformed their peers, with the Euro Stoxx 600 and S&P 500 up 7% and 14%, respectively.
But when you look at the biggest stocks on both sides of the Atlantic, what’s happening at the top of these indexes?
A useful comparison is between an elite European stock called GRANOLAS and the US tech giants known as the Magnificent Seven.
For those unfamiliar with these names, GRANOLAS is an acronym coined by Goldman Sachs during the first European lockdown in 2020 to represent the largest European companies by market capitalization at the time: GSK, Roche, ASML Holding, Nestle, Novartis, Novo Nordisk, L’Oreal, LVMH, AstraZeneca, SAP and Sanofi. As of late June 2024, these companies have a combined market capitalization of approximately €3 trillion.
The “Magnificent Seven” – technology giants Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta Platforms and Tesla – have a combined market capitalisation of $15.8 trillion (€14.8 trillion).
GRANOLAS vs. The Magnificent Seven: Performance Comparison
So far this year, Granola has returned an average of 17%. Danish weight-loss pill maker Novo Nordisk led the group with a 48% gain. Europe’s largest semiconductor company, ASML Holdings AG, followed with a 40% gain, and SAP, up 32%.
French multinational personal care company L’Oreal fared poorly, falling 1.7%.
In contrast, the Magnificent Seven have returned an average of 37%, more than double their European peers. Nvidia led the way with a staggering 150% gain, followed by Meta Platforms at 45%. Tesla is the only stock in the red, down 22% year to date.
The rise of AI and the semiconductor sector
However, if we exclude Nvidia, Magnificent Seven’s average performance drops to 18.8%, only slightly higher than GRANOLAS.
The US stock market’s huge gains are mainly due to the extraordinary rise in Nvidia and other chip makers’ stocks. Investors and analysts are optimistic about the future of artificial intelligence and its potential to improve productivity in the long term, which has led to a large surge in the stock prices of major AI chip makers. Besides Nvidia, US semiconductor companies such as Micron Technology, Applied Materials and Broadcom have posted strong returns of 67%, 45% and 44% respectively year to date.
Europe lacks a significant presence in semiconductor manufacturing, except for ASML, and is lagging behind the US in AI.
The combined market capitalization of US semiconductor companies is around $6 trillion (€5.6 trillion), with Nvidia alone accounting for roughly half of this value. In contrast, Europe’s 59 publicly traded semiconductor companies have a market capitalization of €527 billion, roughly one-tenth of their US peers.
The disparity highlights the key role AI and semiconductor companies play in driving stock market performance, particularly in the U.S., while also highlighting the challenges Europe faces in competing in this rapidly evolving sector.
Shares of major AI chip makers have seen strong gains as investors and analysts continue to express optimism about artificial intelligence’s potential to boost long-term productivity.
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In summary, while Europe’s GRANOLAS performed commendably in 2024, it was largely overtaken by the US’s Magnificent Seven, mainly due to the explosive growth of Nvidia’s AI-driven rally.
If financial markets are saying anything about the economy, this highlights key areas where Europe needs to strengthen its capabilities to compete more effectively on the global stage.
