With plenty of market uncertainty to go around, equities have been mostly in the red the past month. However, for opportunistic traders, this could mean a red tag sale for names in the Magnificent Seven.
The S&P 500 as well as the Nasdaq 100 have both seen double-digit losses with tariffs, inflation, and geopolitical risks applying downward selling pressure. For Magnificent Seven names (Nvidia, Google, Apple, Amazon, Tesla, and Meta) who occupy a major chunk of these indexes, they bore the brunt of much of the downside.
Much of the rise of Magnificent Seven names has been centered around the artificial intelligence (AI) theme. The hype may have already been priced into the shares, allowing for the efficient market hypothesis to eventually bring them back down to earth.
“Seemingly insatiable investor appetite for artificial intelligence and growth propelled the Magnificent Seven higher in 2023 and 2024,” Morningstar said. “They grew significantly more expensive than the rest of the market, but investors appeared willing to pay that premium, thanks to powerful earnings growth and optimism surrounding AI.”
Fast forward to this year and AI appears to have lost its mojo. While there’s no denying the long-term growth AI will bring, the short-term horizon narrows the market lens aperture to what’s happening now. With AI-associated names selling off, investors have sought other avenues for opportunities.
“The mega-cap tech trade began to unwind as investors sought opportunities in other areas, and the Magnificent Seven lost momentum,” Morningstar added.
Single-Stock ETF Options
With the drop in prices, investors do have an opportunity to snatch up these names at relative discounts. As mentioned, the long-term trends should favor companies that continue to capitalize on AI. From a short-term trading perspective, the prospect of rate cuts amid cooling inflation could help lift up the broad equities market, thereby allowing traders to also take advantage of the lower prices.
That said, traders can use leverage to take advantage of some single-stock exchange-traded funds (ETFs):
- Direxion Daily NVDA Bull 1.5X Shares (NVDU)
- Direxion Daily GOOGL Bull 1.5X Shares (GGLL)
- Direxion Daily AAPL Bull 1.5X (AAPU)
- Direxion Daily AMZN Bull 1.5X Shares (AMZU)
- Direxion Daily MSFT Bull 1.5X Shares (MSFU)
- Direxion Daily TSLA Bull 2X Shares (TSLL)
- Direxion Daily META Bull 2X Shares (METU).
These single-stock ETFs give bullish traders an additional 50% leverage to maximize profit potential. They can be helpful during short-term moves when big corporate announcements or, as already mentioned, positive earnings reports bump up the respective stock’s price.
For more news, information, and analysis, visit the Leveraged & Inverse Channel.
