To The Moon

There is something to be said about the Magnificent Seven group of stocks.

For one, a handful of them are really resilient. Nothing could keep them down for long.

Like it or not, they still make up a lion’s share of S&P 500 market value.

However, recently some managers of actively managed mutual funds are seeing better value and growth in Financial and Healthcare stocks, instead of the Magnificent 7.

Underweight Stocks.

A Goldman Sachs recent study found that for Q1 2025, managers of 541 large-cap mutual funds with $3.5 trillion in total assets owned less big tech stocks than their usual benchmarks.

For example, fund managers had the biggest underweight in $Apple(AAPL)$ (#1) and $NVIDIA(NVDA)$ (#2) than their benchmarks:

• Funds held 3.3% in AAPL compared to 6.3% benchmark.

• Funds held 3.6% in NVDA compared to 5.0% benchmark.

Headwinds.

Some of the headwinds facing both Apple Inc and Nvidia.

Apple Inc.

1. Tariff-Related Supply Chain Costs

• Apple is set to incur a $900 million tariff-related cost for Q2 2025, highlighting the vulnerability of its global supply chain to ongoing US-China trade tensions.

2. Geopolitical and Regulatory Pressures

• Heightened geopolitical risks, especially from the US-China trade war, threaten to further inflate costs and disrupt Apple's supply chain.

• Apple is legally challenging a European Union order under the Digital Markets Act that requires it to open its ecosystem to competitors. Compliance is costly, may threaten innovation, and could compromise user privacy and security in the EU.

3. AI Development Delays

• Delays in rolling out new AI features for Siri, now postponed to “the coming year,” have raised concerns about Apple falling behind competitors like Alphabet and Meta in the AI race.

4. Market Saturation and Weakness in China

• iPhone sales in China have stagnated, with a -2% YoY decline in Greater China revenue, reflecting underlying market pressures and saturation.

5. Valuation Concerns

• As of May 2025, Apple’s valuation multiples remain elevated, with a P/E ratio of 33.92 (well above its 10-year average), raising concerns about overvaluation in a volatile market.

6. EU Regulatory Compliance Costs

• Last but not least, Apple must comply with new EU interoperability requirements, which it argues are costly and could erode its competitive advantage and user experience.

Nvidia Corp.

As for the #1 AI chip maker, its headwinds include

1. US Export Restrictions to China

• Nvidia’s FQ1 data center revenue was hit by a $2.5 billion shortfall due to the US ban on H20 chip sales to China. The company expects an additional $8 billion sales hit in Q2 2025 from these restrictions.

• Ongoing uncertainty about future US export rules, with the potential for new or replacement restrictions, adds to the risk.

2. Competition from Chinese Firms and Open-Source AI

• Nvidia faces competition from Chinese companies like Huawei and startups such as DeepSeek, which use older Nvidia chips to train AI models. This could pressure demand for Nvidia’s latest, more expensive GPUs and affect market share in China.

• The company also notes that restrictions on the use of open-source AI models from China could hurt its business.

3. Supply Chain and Product Launch Risks

• Risks remain around supply chain execution, especially as Nvidia accelerates its annual product launch cadence with new architectures like Blackwell and Rubin.

4. Customer Diversification

• Major customers (Amazon, Microsoft, Alphabet, Meta) are increasingly developing custom silicon chips, which could reduce their reliance on Nvidia’s GPUs and cap future growth.

5. Broader Market Correction and Valuation

• Nvidia’s stock declined -17% to –30% YTD as of late April 2025, amid a broader correction in U.S. tech stocks and the "Magnificent Seven" losing significant market cap.

• Technical resistance and market volatility could further dampen investor sentiment.

6. Geopolitical and Regulatory Uncertainty

• Geopolitical tensions, particularly between the US and China, remain a significant overhang, with potential for further trade restrictions or retaliatory policies

Other Magnificent 7 stocks ranked among the Top 10 most underweight stocks included,

• $Microsoft(MSFT)$ (#4).

• $Tesla Motors(TSLA)$ (#5).

• Alphabet - GOOG (#8).

Chip giant Broadcom (AVGO) was #6 most underweighted stock.

The timing & action to cut back above tech stocks has been a smart move and fund managers were rewarded accordingly.

According to Goldman, as a result of funds’ managers decisive actions, 50% of large mutual funds have beaten their benchmarks in 2025, compared to the usual 37%.

Performance.

It is a fact that some of the Magnificent 7 have underperformed so far, in 2025: (see below)

In Details:

As of 03 Jun 2025

• AAPL is still down -16.64% YTD. (see above)

• TSLA is down -9.23% YTD. (see above)

• Meta Platform (META) , Microsoft (MSFT) and Nvidia (NVDA), were the exceptions.

• They are up +12.89% YTD and +9.40% YTD respectively. (see above)

• Likewise for Nvidia, after its Q1 2026 earnings, it managed to rise above the 0.00%, landing at +2.72% YTD on 03 Jun 2025.

As of 03 Jun 2025

(#3) Most underweight stock:

What is interesting is $Berkshire Hathaway(BRK.B)$ a non-momentum play stock is ranked #3 as most underweight stock.

Even though its biggest holding, AAPL, is the #1 most underweight stock, BRK.B still gained +10.36% YTD.

I think the post has proved that “A pedigree stock is a pedigree stock” (eg. BRK.B) whether underweighted by funds managers or not, it still performs. As for AAPL and NVDA, think I will hold onto them a wee longer…

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