Macroeconomics and politics
The myth of the 'Magnificent Seven' is beginning to crumble
2 min read 21 Mar 24
There is still a lot of talk about the dominance of the so-called ‘Magnificent Seven’ (Mag7). However, it often goes unmentioned that the performance within the Mag7 has been anything but even since the beginning of the year. Three of the seven stocks - Tesla, Apple and Alphabet - have even recorded losses in the current year. In addition, the range within the Mag7 is enormous and extends from -29% in the case of Tesla to +86% for NVIDIA (as at 12 March 2024). Therefore portraying the Mag7 as a more or less homogeneous group does not reflect reality.
Past performance is not a guide to future performance.
In addition, the impression is often created that investors have not been able to make money with shares outside Mag7. This is also incorrect. Although the performance of an average share outside the Mag7 has been much more subdued, the range is still very high. For example, only two stocks from the Mag7, NVIDIA and Meta, are among the strongest 100 stocks in the MSCI ACWI this year. The universe of good investment opportunities therefore extends far beyond the Mag7.
Artificial intelligence (AI) is driving the semiconductor sector in particular
However, it is undisputed that there are currently a particularly large number of outperformers among technology-orientated companies. The semiconductor sector in particular stands out here. The sector is one of the first to benefit from the topic of AI and the associated global need for investment in the expansion of storage and computing capacities. This is because the amount of data to be processed by AI systems is increasing exponentially. Even if considerable price gains have already been achieved in some cases, there are still selective opportunities in our view.
Green energy as an anti-cyclical opportunity?
By contrast, another megatrend - green energy - does not seem to radiate much optimism at present. Its performance has been disappointing for some time, to put it mildly. In our opinion, however, this does not change the long-term investment case. On the contrary, investments in green energy and the associated infrastructure are likely to increase significantly worldwide in the coming years, opening up growth opportunities for the companies involved. However, selectivity is also required here, as not all companies will succeed. In our view, the high-quality companies with genuine competitive advantages are likely to emerge stronger from the current weak phase. Despite the existing uncertainties - e.g. in connection with the upcoming elections in the USA - there could therefore be interesting investment opportunities for patient investors with strong nerves.
Past performance is not a guide to future performance.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested.
The views expressed in this document should not be taken as a recommendation, advice or forecast.