Mag 7: Buy AAPL, MSFT & NVDA only ? Why ?
The Magnificent Seven stocks accounted for much of the stock market’s gain in 2023.
This year, it’s a bit more hit or miss.
However, InvestorPlace believes this trio tech growth stocks (out of the Magnificant 7) will continue to fire up your portfolio again in 2024. (see below)
They are:
$Apple(AAPL)$: The consumer products giant has massive reach into the gadgets people want.
$Microsoft(MSFT)$: Having infused all of its products and services with AI, MSFT stock is already off to a fast start.
$NVIDIA Corp(NVDA)$: The chipmaker is hot out of the gate because of AI, with NVDA stock leading the group of seven again.
The group of companies known as the Magnificent Seven set the market on fire in 2023, rising +111% on average.
All of them handily outperformed the bull market returns of the index.
Unfortunately, 2024 is shaping up a little different.
Although only 7 weeks into 2024, many of the seven technology stocks are off to a much slower start.
They’re up an average of +10.5% so far. That might not seem so bad since just 7weeks into the new year.
Two of 7 Magnificant are faring rather poorly:
$Tesla Motors(TSLA)$ is gapping down -22%.
$Alphabet(GOOG)$ lags with just a +6% gain.
It will be a different outcome for the tech giants this year.
As a result, the following three Magnificent 7 stocks are the only ones you should consider buying.
Apple Inc
Apple is one of the stumbling stocks stumbling with shares down -2% to start.
While AAPL stock was the “worst” performer last year at only a +48% gain, this time Apple is heading in the wrong direction.
Parts of its business are cyclical or at least associated with changing consumer preferences.
Much of Apple’s performance is tied to the iPhone and the overall mobile device upgrade cycle. There were signs last year the business was slowing again.
The consumer products giant is reliant upon China for much of its supply chain, and it has been late to artificial intelligence (AI).
In fact, Apple might not have an effective response to all the generative AI developments until 2025.
What AAPL have going for it, is a tightly woven fabric of (a) hardware, (b) software, and (c) services that feed into one another in a virtuous circle of growing sales and profits.
Increasingly pulling more of its chip development in-house, Apple can also react more quickly to product innovation needs, the AI lapse notwithstanding.
Needless to say, Apple stock is a cash-generating machine:
It has nearly $62 Billion in cash & equivalents in the bank.
It produced > $106 Billion in free cash flow (FCF) over the last 12 months.
Further, Apple richly rewards shareholders with dividends and stock buybacks.
Making it a great Magnificent 7 stock to own today and hold onto in the future.
Microsoft.
So far, Microsoft is up +8.95% in 2024 (YTD as of 19 Feb 2024).
This comes after turning in solid Q2 results that improved on the top and bottom lines.
Unlike Apple, it did not miss the AI boat but rather was helping to row it forward.
The software giant infused all of its product offerings with the latest iteration of OpenAI’s generative AI ChatGPT.
Now branded as Copilot, Bing search is now more relevant even if it has not chipped away much at Google’s lead.
Data from StatCounter indicates Google search still has easily a 91% share while Bing inched forward 0.50%.
In fact, Microsoft’s cloud services are seeing big gains:
It has put AI into its Azure platform and supercharged growth.
Revenue on the platform surged +24% YoY to hit $33 Billion in Q2.
More important, six points of that growth were attributed to Azure’s AI services.
The cloud business grew to 53,000 customers, more than 33% came to Microsoft over the past year.
Copilot is everywhere at Microsoft and in everything, pushing total quarterly revenue +18% higher to $62 Billion.
That’s amazing for a company with a $3.1 Trillion market capitalization.
Microsoft’s investors benefit from an aggressive policy of returning capital to shareholders.
It has reported $8.4 Billion in dividend payments and stock buybacks in Q2.
That is a return of value any investor can appreciate.
Nvidia.
The granddaddy of AI stocks has to be Nvidia.
The chipmaker has become the face of AI.
In 2023, it was the leading Magnificent 7 stock, with shares more than tripled in value.
In 2024, they are leading the way again with a 50.75% gain as of 16 Feb 2024 closing.
It is well on its way to a $2 Trillion valuation.
Nvidia’s competitive moat is too broad and deep for challengers to safely cross:
It owns the graphics processing unit (GPU) market with an 82% share.
It reigns as the dominant force in AI accelerators used at data centers and elsewhere.
While Advanced Micro Devices ($AMD) and Intel ($INTC) are nibbling away at the edges, Nvidia owns the core.
As CEO Jensen Huang has said:
Every single aspect of the company’s business is on fire.
They “are all growth engines in full throttle.
With no letup in sight for AI chips and capabilities, NVDA stock is the premiere Magnificent 7 stock investors should be buying now.
My viewpoints: (mine & mine only)
Although there are facts & truth in the post, overall its a feel-good post (to me personally).
If we really explore the YTD performance of the Magnificant 7 stocks (see above), the Top 3 stocks are supposed to be (1) Nvidia, (2) Meta Platform and (3) Amazon.
Yet, in InvestorPlace’s post, the “revised” Top 3 recommended stocks were (a) Apple Inc, (b) Microsoft and (c) Nvidia.
The only overlapping US stock is Nvidia. Remaining 2 were vastly different.
There were no mentions of all tech giants in Magnificant 7 - developing their own Ai chips (especially) instead of relying on Nvidia’s, either. (see below)
Meta Platform Inc developing their own AI chip
Google developing their own AI-chip for cloud services
Microsoft developing their own AI chip
Amazon developing their own AI-chip
If you noticed, all these news were from Q4 2023 onwards.
Would these “self sufficiency” acts by the Tech giants dampens Nvidia’s overall sales growth quarterly and annually?
Very certain that all eyes will be on Nvidia’s 2023 last quarter earnings that would be released on Wed, 21 Feb 2024.
I would be more of a watcher than buyer this week and next because market would be acutely “sensitive” for my liking; NOT unless the reasons are super compelling.
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