Friday, July 11, 2025
HomeMarket3 new reasons to be concerned about Magnificent 7 stocks

3 new reasons to be concerned about Magnificent 7 stocks

-

[ad_1]

With the often-hot Magnificent Seven trade on the skids less than two months into the year, investors may need to reconsider their position before the selling picks up.

“Over the last several years we have maintained the view, that it was prudent for long-only US equity managers to be at least market-weight the Mag 7. Today, our views have evolved to the point where we are changing our mind and believe lowering exposure is prudent,” Trivariate Research founder and CEO Adam Parker said in a new note Tuesday.

The Magnificent Seven trade of Meta (META), Amazon (AMZN), Google (GOOG), Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA) has underwhelmed of late. Only one of the big-cap tech components — Meta — has posted double-digit gains out of the box, more in line with the sector’s usual strong performance.

Amazon is the only other Magnificent Seven component to be up on the year to the tune of 5.2%, slightly ahead of the 3.5% increase for the S&P 500 (^GSPC). Alphabet, Apple, Nvidia, Microsoft, and Tesla are all down year to date, with an average drop of 3% based on Yahoo Finance’s calculations. Tesla is the worst performer, off by 17% this year.

Reasons for the sell-off range from weakening sales (Tesla) to rising fears tech companies are spending too much to build AI infrastructure (the rest of the Magnificent Seven).

Veteran markets expert Parker thinks now is a good time for investors to reduce exposure for three reasons.

For one, the Street is unlikely to stop scrutinizing how much is being spent on capex for AI in 2025 and 2026.

Meta, Microsoft, Amazon, and Alphabet are slated to spend a cumulative $325 billion in capital expenditures and investments this year, Yahoo Finance’s Laura Bratton reports. This would mark a 46% increase year over year for the four tech stalwarts.

Amazon alone sees $104 billion in capital expenditures this year, well above prior analyst forecasts of $80 billion to $85 billion.

The stocks have tended to react negatively to these bold spending commitments, points out Parker.

“There is no question either way that the high capital spending will continue to come under increasing scrutiny until investors can better understand the return on today’s massive investments,” says Parker.

Valuation on Magnificent Seven stocks — despite their sell-off — also remains a concern for Parker.

Parker’s research shows the relative price to forward earnings multiple of the Magnificent Seven versus the rest of the S&P 500 is at a 42% premium. That’s toward the upper range of its 25-year average.



[ad_2]

Source link

LATEST POSTS

Ceritafilm Explores the Heart of Every Movie Through Story Reviews

Introducing ceritafilm: Where Movies Meet Meaningful Stories In a world flooded with movie ratings, short reviews, and spoiler-filled discussions, https://ceritafilm.com stands out by offering something truly...

How to Standardise Laptop Setup for Staff: Creating Consistent Configurations

In today’s fast-paced business environment, ensuring that every employee’s laptop is set up consistently is more important than ever. A standardised laptop setup helps streamline...

Turn Health into Wealth with LifeWave X39

In today’s world, people are searching for two things more than ever:✅ Better health✅ Financial freedom With LifeWave X39, you don’t have to choose — you...

Soft Play Bus Essex with Squeeze Rollers & Dizzy Discs – A Fun-Filled Mobile Adventure

In today’s world of children’s entertainment, finding activities that combine physical play with safety and creativity can be a challenge. The Soft Play Bus Essex offers a...

Most Popular

spot_img