"Mag 7" is outdated? Wall Street wants AI!
The internal differentiation of "Mag 7" is obvious, with uncertain prospects for Apple and Tesla, while NVIDIA, Microsoft, and others are still viewed positively. As the AI investment theme expands, emerging AI beneficiary stocks such as Oracle, Broadcom, and Palantir have performed outstandingly, with Oracle rising over 75% and Palantir rising 135%. Wall Street has proposed new combination concepts such as "Big Six," "Elite 8," and "Magnificent 10."
Wall Street's most influential stock portfolio, the "Magnificent Seven," is facing a redefinition as investors begin to seek new portfolios that more comprehensively reflect the beneficiaries of the AI revolution.
Since OpenAI's ChatGPT sparked a global AI frenzy nearly three years ago, the "Mag 7," consisting of NVIDIA, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla, has dominated the rise of U.S. stocks, but the AI investment theme has expanded to a broader range of companies.
The evolution of the AI investment theme has given rise to new market leaders, with companies like Broadcom, Oracle, and Palantir emerging as forces that cannot be ignored due to their outstanding performance in the AI field. Oracle's stock price has risen over 75% this year, while Palantir has been the best performer in the Nasdaq 100 index, with a gain of 135%.
Wall Street is proposing various new stock portfolio concepts to capture the true AI winners. From "Fab Four" to "Elite 8," various iterations attempt to more accurately reflect investment opportunities in the AI era, and the Chicago Board Options Exchange has even launched a "Magnificent 10" index that includes ten stocks.
Traditional Tech Giants' Status Changing
Data shows that the "Mag 7" still accounts for nearly 35% of the S&P 500 index's weight, with expected earnings growth of over 15% by 2026. However, the differentiation within the portfolio is becoming increasingly apparent:
NVIDIA, Alphabet, Meta, and Microsoft are seen as beneficiaries of the AI era, while the prospects for Apple, Amazon, and Tesla are relatively unclear.
Chris Smith, portfolio manager at Artisan Partners managing $2.4 billion in assets, stated, "Just because the 'Mag 7' won in past tech cycles like mobile internet and e-commerce does not mean they will win in the AI era."
Apple faces dual pressures of slowing growth and lagging in the AI field, while Tesla's electric vehicle business is under pressure due to declining sales and increased competition.
Nevertheless, both companies still have a large following, betting that Apple's iPhone will become the primary device for consumers using AI, while Tesla hopes for success in autonomous driving and humanoid robot businesses.
Jurrien Timmer, global macro director at Fidelity Investments, pointed out:
"A company can become too big to ignore. As the AI story unfolds, new winners may replace old winners."
Wall Street Redefines AI Beneficiary Stock Portfolio
AI investment opportunities have expanded beyond the traditional "Mag 7" into multiple sectors.
Oracle has outperformed most "Mag 7" members with strong growth in its AI-related cloud computing business. Palantir stands out as one of the few winners in AI software, especially as traditional software leaders like Salesforce and Adobe face concerns of being marginalized.
The expansion of the AI industry chain brings investment opportunities to more companies.
Taiwan Semiconductor Manufacturing Company (TSMC) is seen as a key component of the AI ecosystem, while communication equipment company Arista Networks and storage chip manufacturer Micron Technology also benefit from AI infrastructure development.
In light of the expanding AI investment theme, Wall Street analysts have proposed various new stock portfolio concepts.
Seaport Research's Chief Equity Strategist Jonathan Golub suggests excluding Tesla to create a "Big Six" portfolio. Melius Research's Ben Reitzes prefers an "Elite 8" portfolio that includes chip manufacturer Broadcom.
The "Magnificent 10" index launched by the Chicago Board Options Exchange includes the original seven companies along with Broadcom, Palantir, and AMD. The exchange stated that the selection of constituent stocks is based on "liquidity, market capitalization, trading volume, and leadership in areas such as artificial intelligence and digital transformation."
Nick Schommer, a portfolio manager at Janus Henderson managing approximately $34.7 billion in assets, stated:
"We really need to broaden the discussion beyond the 'Mag 7', and Oracle is definitely part of that now, as is Broadcom."
