Should You Buy the Dip in "Mag 7" and Big Tech ETFs?

Zacks07-30

On Jul 26, 2024, the big tech-heavy Nasdaq 100 ETF QQQ recorded a 1% gain after two days of bloodbath on an apparent “AI fatigue.” The tech slump that happened last week was triggered by Alphabet Inc....

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Tesla Inc.’s TSLA stock also suffered following its earnings results due to a lack of details from CEO Elon Musk on the company's self-driving vehicle efforts (read: Time for Covered Call ETFs?Most artificial intelligence  technology leaders, including semiconductor giants like NVIDIA Corp. NVDA, took a beating in the middle of last week. Many feared that the huge AI investments made by big tech companies would pay off later than expected.The scale of profitability of those investments is also unknown now, while the high valuation of the AI stocks is a concern for many investors. But does this fear make sense?Should you buy the dip in “Magnificent Seven” – Apple, Alphabet, Amazon, Meta, Microsoft, Tesla and NVIDIA and ","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD","BK4553":"喜马拉雅资本持仓","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","GOOG":"谷歌","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","AAPL":"苹果","GOOGL":"谷歌A","MGK":"Vanguard Mega Cap Growth ETF","BK4555":"新能源车","LU2063271972.USD":"富兰克林创新领域基金","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","META":"Meta Platforms, Inc.","LU2756315664.SGD":"ALLIANZ INCOME AND GROWTH \"AMI\" (SGDHDG) INC","LU0175139822.USD":"AB FCP I Global Equity Blend A USD","BK4559":"巴菲特持仓","LU0689472784.USD":"安联收益及增长基金Cl AM AT Acc","LU2087621335.USD":"ALLSPRING GLOBAL FACTOR ENHANCED EQUITY \"A\" (USD) ACC","IE00B19Z8X17.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH  \"AG\" (USD) ACC","LU2326559502.SGD":"Natixis Loomis Sayles US Growth Equity P/A SGD-H","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","TSLA":"特斯拉","BK4550":"红杉资本持仓","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","LU0861579265.USD":"联博低波幅策略股票基金A","MAGS":"The Magnificent Seven ETF","LU1861558580.USD":"日兴方舟颠覆性创新基金B","LU0820561818.USD":"安联收益及增长平衡基金Cl AM DIS","IE00B19Z8W00.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH \"A\" INC","BK4551":"寇图资本持仓","BK4554":"元宇宙及AR概念","NVDA":"英伟达","LU2756315318.SGD":"ALLIANZ INCOME AND GROWTH \"AMG\" (SGDHDG) INC A","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","MSFT":"微软","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD)   INC","IE00B4JS1V06.HKD":"JANUS HENDERSON BALANCED \"A2\" (HKD) ACC","FDN":"First Trust Dow Jones Internet I","XLG":"Invesco S&P 500 Top 50 ETF","AMZN":"亚马逊","LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC","LU0640476718.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","LU0048573561.USD":"FIDELITY AMERICA \"A\" (USD) INC","LU0052756011.USD":"TEMPLETON GLOBAL BALANCED \"A\" (USD) INC","QQQ":"纳指100ETF","LU0642271901.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD-H","IE00BDCRKT87.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"ADC\" (USD) INC","LU0056508442.USD":"贝莱德世界科技基金A2","LU0048584097.USD":"FIDELITY FUNDS  GLOBAL THEMATIC OPPORTUNITIES \"A\" (USD) INC"},"translate_title":"您应该逢低买入“Mag 7”和大型科技ETF吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XLG":1,"MGK":1,"MAGS":1,"QQQ":0.9,"FDN":0.9,"GOOG":0.9,"AMZN":0.7,"TSLA":0.7,"NVDA":0.7,"MSFT":0.7,"META":0.7,"AAPL":0.7,"GOOGL":0.7},"content_text":"On Jul 26, 2024, the big tech-heavy Nasdaq 100 ETF QQQ recorded a 1% gain after two days of bloodbath on an apparent “AI fatigue.” The tech slump that happened last week was triggered by Alphabet Inc.'s GOOGL earnings report, which highlighted increased capital expenses. Tesla Inc.’s TSLA stock also suffered following its earnings results due to a lack of details from CEO Elon Musk on the company's self-driving vehicle efforts (read: Time for Covered Call ETFs?).\nMost artificial intelligence (AI) technology leaders, including semiconductor giants like NVIDIA Corp. NVDA, took a beating in the middle of last week. Many feared that the huge AI investments made by big tech companies would pay off later than expected.\nThe scale of profitability of those investments is also unknown now, while the high valuation of the AI stocks is a concern for many investors. But does this fear make sense? Should you buy the dip in “Magnificent Seven” – Apple, Alphabet, Amazon, Meta, Microsoft, Tesla and NVIDIA and their ETFs? Was the latest selloff healthy?\nLet’s find out.\nWill Return on AI Investments Be Realized Later Than Expected?\nA lack of visibility makes it difficult to determine a return on investment for big tech’s AI capex. Microsoft's capex on generative AI in data centers is expected to grow from $16 billion in fiscal 2024 to $23 billion in fiscal 2027, per Morgan Stanley analyst Keith Weiss, as quoted on investors.com.\nMeanwhile, he predicts generative AI revenues of $5.3 billion in fiscal 2024 and $37.9 billion in fiscal 2027. Those estimates assume a \"relatively modest\" gross profit margin of about 50% in fiscal 2027. But then, with AI producing decent results in multiple business areas, the adoption of and the demand for AI tools is likely to go higher in the coming days globally.\nIn a 2024 McKinsey survey, 39% of respondents witnessed lower costs resulting from AI adoption in their organization, as quoted on Forbes. This means that over the long run, the AI business may prove to be at least a volume-driven revenue engine, if not realization driven.\nMeanwhile, investments in AI are being made in full stride by big tech companies, sensing the potential. So, if you are not buying the momentum now and are waiting for the realization of a proper return-on-investment, you may be missing out on the current rally. And by the time, you want to jump into the AI initiative, the move might already be priced in.\nWhat Does Valuation Say?\nOne should not forget that the AI king NVIDIA currently trades at a forward P/E of 42.1X versus 46.8X for the Semiconductor-General sub-industry. Alphabet trades at a forward P/E of 22X versus 23X for the Internet Services Market sub-industry.\nMicrosoft’s forward P/E stands at 32.3X versus Underlying Computer-Software Market’s P/E of 34.6X. Meta’s forward P/E stands at 23X, a 35% discount to its underlying sub industry software market’s P/E of 35.4X.\nAmazon AMZN, however, looks pricey given its forward P/E of 39.8X, trading at a premium to the sub-industry e-commerce market’s forward P/E of 27.5X. That said, we all know that Amazon today is more than an e-commerce company, it’s more in the information technology league. Apple AAPL trades at a P/E of 33.1X versus the underlying computer mini-market’s P/E of 31.3X.\nNeed to be Choosy on AI Pick?\nPrimarily, all big techs are investing billions in AI, but not everyone is tasting the same success. Microsoft-backed OpenAI’s ChatGPT fired on all cylinders in its initial days of launch in late 2022. OpenAI has now posed its most direct challenge yet to Alphabet’s Google: a search engine that uses artificial intelligence baked in from the beginning.\nOpenAI is testing SearchGPT, which will combine its AI technology with real-time information from the web to allow people to search for information. However, we are yet to be sure that OpenAI will be seen as great a success in Internet search as Google. While Alphabet initially stumbled on the Gen-AI initiative, Google has made the Gemini AI free version faster with a 1.5 flash update.\nAre ETFs Better Bets?\nThe above-mentioned valuation and demand for AI show that the charm of big techs is still present. The likely Fed rate cuts in the near term should boost these growth companies even more. However, if you are unsure about picking the right AI stock, the ETF or basket approach is good for you. Roundhill Magnificent Seven ETF MAGS will give you direct exposure to the “Mag 7” stocks. The fund was off 5.5% last week, opening a good entry point now.\nOther ETFs that can offer you a good amount of “Mag 7” exposure include Invesco S&P 500 Top 50 ETF XLG, Vanguard Mega Cap Growth ETF MGK and QQQ.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nAmazon.com, Inc. (AMZN) : Free Stock Analysis Report\nApple Inc. (AAPL) : Free Stock Analysis Report\nNVIDIA Corporation (NVDA) : Free Stock Analysis Report\nTesla, Inc. (TSLA) : Free Stock Analysis Report\nInvesco QQQ (QQQ): ETF Research Reports\nAlphabet Inc. (GOOGL) : Free Stock Analysis Report\nInvesco S&P 500 Top 50 ETF (XLG): ETF Research Reports\nVanguard Mega Cap Growth ETF (MGK): ETF Research Reports\nRoundhill Magnificent Seven ETF (MAGS): ETF Research Reports\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2455692516"}