To The Moon

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$Goldman Sachs(GS)$ is taking some profits out of soaring tech stocks and redirecting them towards lower-cost companies. A recent analysis shows that the combined market value of the "Magnificent Seven" has exceeded $13 trillion.

Alexandra Wilson-Elizondo, co-chief investment officer of Goldman Sachs Multi-Asset Solutions, said the firm believes tech stocks will be under pressure, and is more optimistic about areas like energy and Japanese stocks. In her view, the US economy is heading towards a soft landing, but there are plenty of risks that could change that trajectory.

She added:

We love taking profits in tech and moving them to other sectors. In tech, the risk-reward ratio is tipping towards the downside. While we still believe in being long stocks and including them in our portfolios, we think there are more attractive opportunities out there.

Returns for Magnificent Seven have started to diverge:

$NVIDIA Corp(NVDA)$ 's shares have surged 72% this year, but other companies are struggling.

$Apple(AAPL)$ 's stock has been weak due to weak demand for iPhones in China, and $Tesla Motors(TSLA)$ 's shares have fallen 30% amid concerns about demand for electric cars.

Goldman Sachs has increased its holdings in energy stocks as a hedge against inflation and geopolitical risks, said Wilson-Elizondo. So far, this strategy has paid off. The oil and gas sector of the $S&P 500(.SPX)$ has risen 16%, while tech stocks have gained 11%.

She said they're still cautious about utilities and REITs, as well as small-cap stocks sensitive to high interest rates. But even so, some small-cap stocks are still attractive due to their low valuations, and some could be acquisition targets for fast-growing AI companies.