According to a Reuters report, Goldman Sachs’ (NYSE:GS) data shows that hedge funds have significantly increased their exposure to the magnificent seven stocks, including Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), and Tesla (NASDAQ:TSLA). Although hedge fund signals are positive for these tech giants, it is best for investors to analyze stocks on multiple parameters. For instance, savvy investors can leverage TipRanks’ Experts Center tools to make an informed investment decision.
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With this backdrop, let’s check what the future holds for these stocks.
What are the Magnificent Seven Stocks Returning So Far?
After a dismal show in 2022, these seven stocks roared back, making their investors rich. (See the graph below.) The higher probability of less aggressive interest rate hikes in the coming months, continued moderation in the inflation rate, and the solid uptake of Generative AI (Artificial Intelligence) are why hedge funds and investors are buoyant on these magnificent seven stocks.
Leading the AI race is Nvidia, whose stock is galloping ahead with a stellar 237.2% gain on a year-to-date basis. Following Nvidia is the social media king, Meta Platforms, whose shares are up about 145%. During the same period, Tesla stock more than doubled, just when Amazon and Alphabet stocks are up about 61% and 54%, respectively.
Shares of the tech giant Apple have gained nearly 45%, while Microsoft, which is investing heavily in AI, witnessed a 38% growth in its stock.
Even if these stocks have appreciated significantly, the recovery in cloud computing, reacceleration in advertising spending, and AI-led opportunities continue to support the bull case. However, the economy still exhibits weakness, implying investors should take caution before going long on all seven magnificent stocks.
The Road Ahead
TipRanks’ Stock Comparison tool shows that NVDA, GOOGL, MSFT, and AMZN have received a Strong Buy consensus rating. Moreover, these stocks have an Outperform Smart Score on TipRanks.
Nvidia is poised to benefit from solid AI-led demand that will enable it to generate significant revenue and cash flows. Further, the company will likely enhance its shareholders’ returns through massive share buybacks. As for Alphabet, Microsoft, and Amazon, the reacceleration in the cloud segment, investments in AI and its integration into their products, and improvement in ad spending provide a solid foundation for future growth.
On the other hand, the decline in sales of the iPhone, iPad, and Mac in Q3 keeps analysts cautiously optimistic on Apple stock. Nevertheless, it has a “Perfect 10” Smart Score. Meanwhile, the near-term pressure on margins keeps analysts cautious about Tesla stock.
The Takeaway
As hedge funds and large institutions are known for generating market-beating returns, investors should closely watch their trades to form investing ideas.
However, when investing for the long term, one must also consider analyzing a stock on multiple parameters, including analysts’ ratings, fundamentals, and insider transactions, among others.
To make things easier for retail investors, TipRanks offers a valuable tool like the Smart Score, which scores stocks based on eight key parameters, such as Wall Street analysts’ ratings, corporate insider transactions, fundamentals, and technical analysis, among other metrics.
Based on Smart Score, Tesla and Meta are the two stocks with a Neutral Smart Score. Meanwhile, the rest carry an Outperform Smart Score, implying these stocks are more likely to beat the broader markets with their returns in the coming days.
