Some of the biggest exchange-traded funds (ETFs) that are highly exposed to the "Magnificent 7" have been pummeled since last week amid a selloff in tech stocks.

The group of mega-cap tech stocks includes Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Meta Platforms (META), Google parent Alphabet (GOOGL), Tesla (TSLA), and Nvidia (NVDA), which have taken hits this week amid weaker-than-expected earnings and soaring Treasury yields.

The list of heavily impacted ETFs includes some of the market's most recognized, like the Invesco QQQ Trust (QQQ), which tracks tech-centric market indexes like the Nasdaq 100. QQQ invests roughly 40% of its assets in the Magnificent 7 stocks and has shed more than 6% since Oct. 17. That was just before Tesla reported earnings, the first of the seven companies to do so.

The Vanguard Information Technology ETF (VGT), one of the biggest tech-focused ETFs with holdings in Apple, Microsoft, and Nvidia comprising more than 45% of its roughly $50 billion in assets under management (AUM), is also down close to 6% since last Tuesday.

Perhaps the most exposed ETF, in terms of the percentage of assets allocated toward the Magnificent 7, is the Vanguard Mega Cap Growth ETF (MGK), with holdings in the seven tech giants constituting 57% of its portfolio. MGK has fallen roughly 6% since Oct. 17.

While MGK may be among the most exposed to the Magnificent 7, its returns don't top the ranks of the steepest drawdowns. The VanEck (SMH) and iShares Semiconductor ETFs (SOXX), which are heavily invested in Nvidia and other chipmakers, have shed 7% and 8% of their value, respectively, as chipmakers have recorded some of the steepest losses among tech stocks.

How Have Individual Tech Stocks Fared?

Among the Magnificent 7 companies, shares of Tesla, which posted lackluster third-quarter earnings on Oct. 18, have shed almost 19% of their value since last Tuesday—the steepest decline among the group.

Shares of Google parent Alphabet had the second-worst performance, tumbling more than 12% after the tech giant's cloud revenue fell short of expectations in the latest quarter, prompting investors to sell their shares.

Shares of Nvidia and Meta Platforms have fallen roughly 8% since last Tuesday, while those of Apple are down just over 5%. Shares of Amazon and Microsoft, which are down 3% and 1%, respectively, were the least affected. Both companies benefitted from strong cloud revenues in the latest quarter.

Taken together, the selloff in big tech stocks, which even on their own constitute a sizable share of the U.S. equity market's capitalization, dragged down the major stock market averages. The S&P 500 is down 6% since last Tuesday, while the Nasdaq Composite Index has fallen almost 7%.

Soaring Yields Dragging Down Tech

Yields on U.S. Treasurys have soared in recent weeks, with the yield on the 10-year note briefly crossing 5% on Monday for the first time since 2007.

Why is this significant? Tech stocks are particularly vulnerable to rising yields as they make borrowing money to fund rapid growth more expensive. When yields on long-term Treasurys rise, companies need to pay out more to bondholders in the form of interest payments, which eats into cash flows.

However, tech stocks' performance so far this year paints a different picture.

The Nasdaq 100—a collection of some of the biggest tech stocks traded on the Nasdaq—is slightly higher now than when the Fed started raising interest rates in March of 2022, even accounting for the recent selloff.

More gains could be ahead, analysts from Wedbush Securities say, as the AI revolution creates a unique risk-on environment that could power through higher interest rates.