The Magnificent Seven and market fragility: What SME owners should watch
The US equity market continues to climb, but the engine driving it is increasingly narrow. The Magnificent Seven—Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla—now make up around 37 percent of the S&P 500, compared to just 12 percent a decade ago. Their dominance is powered by the AI infrastructure boom, with Nvidia alone generating US$46.7 billion in the July quarter, US$41.1 billion of which came from data centre spend.
This concentration creates a paradox. On one hand, AI-driven earnings and rate-cut optimism have helped markets stay resilient. On the other, any slowdown in hyperscaler investment or regulatory intervention could trigger sharp reversals. For SME owners, this fragility matters. It shapes investor sentiment, capital availability and valuation expectations, particularly in tech-adjacent sectors.
We believe this environment presents both risk and opportunity. Our advisory work with founders and owners shows that strategic clarity and operational readiness are more important than ever.
Why this matters now
Despite global volatility, Australian M&A activity remains robust. According to Morgan Shaw Advisory’s latest Capital Markets Wrap, deal flow is strong across infrastructure, resources, gaming, tech and healthcare. Private equity is driving large-scale carve-outs, while strategic acquirers are leveraging strong balance sheets to pursue growth.
Inbound M&A into Australia has surged to near-record highs, with US$19.6 billion in deals across 160 transactions so far in 2025. Investors from Japan and the United States are targeting resilient sectors such as mining, fintech, cyber risk and digital infrastructure. This influx of capital is a tailwind for SME owners, but it also raises the bar for readiness and differentiation.
Market signals SME owners should watch
Storage sector consolidation
A$2.2 billion bid for Abacus Storage King faces resistance, while BlackRock and Kennards are reportedly circling WA assets. If a A$200 million package comes to market, expect sharp pricing due to operating synergies.
Healthcare innovation
ENA Respiratory’s A$34 million Series B raise, backed by the Gates Foundation, signals global interest in seasonal respiratory platforms. The funding will support Phase II trials of INNA-051, a broad-spectrum antiviral nasal spray.
Consumer platform privatisations
Grindr received a US$3.46 billion take-private proposal at US$18 per share. The premium offer reflects continued interest in niche consumer platforms with loyal user bases.
Telco cost discipline
Optus is reviewing its Sydney campus footprint and trimming on-site perks, reflecting broader cost-out pressure from Singtel. Expect more operational discipline across the Australian telco sector.
How MSA helps clients navigate concentrated markets
At Morgan Shaw Advisory, we help SME owners prepare for sale, capital raise or strategic partnership through our EBITDA+ SIX STEPS TO SUCCESS™ methodology. This framework focuses on:
Strategic planning aligned with buyer expectations
Operational improvements that drive valuation
Market intelligence to identify timing and positioning
Advisory committees to monitor progress and adapt
Exit readiness assessments and gap analysis
Our clients consistently outperform market benchmarks by being “Game Ready” — a state of preparedness that attracts premium buyers and maximises outcomes.
What SME owners should do now
Assess exposure to tech cycles: Are you reliant on hyperscaler spend, tech valuations or AI narratives? Diversify where possible.
Benchmark your business: Use MSA’s Game Ready framework to assess sale readiness.
Watch valuation trends: With rate cuts and global flows driving deals, now is the time to benchmark your business’s worth.
Consider strategic timing: The second half of 2025 is shaping up as a seller’s market.
Engage early: Buyers are more sophisticated, and regulatory scrutiny is rising. Early preparation is key.
Ready to act?
If you are considering a sale, capital raise or strategic partnership, now is the time to act. https://www.morganshawadvisory.com/contact to explore your options and maximise your outcome.