Enhanced Outcomes and Appealing Profit Potential (Rating Enhancement)
In the ever-evolving world of business, a select group of companies have managed to stand out from the crowd. Known as the "Magnificent Seven," these tech giants have been making headlines due to their accelerated revenue and operational profit growth rates, despite the general trend of moderate growth as companies reach maturity.
However, not all is smooth sailing for the Magnificent Seven. Each company faces its own set of challenges, such as antitrust issues for Meta and Alphabet, and tariff policy concerns for Amazon, Apple, Nvidia, and Tesla.
The market's keen interest lies in these companies' cloud results, as this segment fuels the demand for AI chips and infrastructure. Recently, Microsoft and Meta have exceeded market revenue estimates, with growth expectations of +14% to +16% and +21% for Q3 respectively.
The Roundhill Magnificent Seven ETF, which tracks these seven US tech giants, has been a subject of interest among investors. Over the past two years, it has traded between 22x and 36x earnings, with an average of 29x earnings. As of the publication date, the ETF manages $2.62 billion in assets and has an expense ratio of 0.29%.
Despite the worsening of macroeconomic indicators, the ETF has shown strong momentum, with a potential upside of 23% if it returns to trading at 37x earnings. Seeking Alpha's Quant tools recommend buying the Roundhill Magnificent Seven ETF due to its strong momentum.
However, it's important to note that the ETF's holdings are not equally weighted. Nvidia holds a 16.01% weight, and Tesla holds a 12.19% weight. The estimated capex for 2025 has increased by 11%, and the estimated capex for 2026 has increased by 20%.
The net income for the Magnificent Seven is expected to grow 22.8% in Q3, while the other 493 companies should grow only 2.6%. AI applications have driven the results of these companies, and each has a clear positioning in this segment.
The market has increased its projected growth for the Magnificent Seven compared to other companies. Since the initial article was published, the S&P 500 rose 9.39%, while the ETF rose 7.46%.
Looking ahead, the strong momentum of the Roundhill Magnificent Seven ETF could be impacted by the worsening of macroeconomic indicators. But for now, these tech giants continue to dominate the landscape, with their clear focus on AI and cloud services driving their growth.
In a broader context, the author's portfolio selection for 2025 includes a diverse mix of assets, including cryptocurrencies, dividend aristocrat stocks, holdings focusing on commodities, energy, healthcare, technology, and consumer staples, and top artificial intelligence stocks.
The Roundhill Magnificent Seven ETF (BATS:MAGS) is a testament to the enduring power of these seven US tech giants and their ability to adapt and thrive in an ever-changing market.
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