FIRED Up Wealth
Motley Fool Analyst & Investment Educator
Nvidia's robotics and autonomous-vehicle opportunities are not yet baked into its valuation. The stock looks super cheap here and ranks first among the Magnificent Seven for investment attractiveness. x.com x.comÂ
The alpha now lies in cheap Magnificent Seven stocks about to reap biblical returns from their capex, with Meta, Amazon and Nvidia the top three picks. x.com x.com x.comÂ
Microsoft's position is the most crowded among the Magnificent Seven, and fund flows are against it as funds sell those stocks to reserve cash for Anthropic's IPO. It faded despite an excellent earnings report. x.comÂ
Meta's core advertising business is significantly outgrowing its biggest competitors even before factoring in the newer businesses it is building. Q3 ad revenue rose 26% year over year, versus 10.6% at Alphabet and 10.9% at Amazon. Back at 19x forward earnings, Meta is the most undervalued Magnificent Seven stock. x.com x.comÂ
The Magnificent Seven will keep making investors rich and should consistently outperform the market, because they are super cheap relative to the S&P 500's P/E. The group covers Nvidia, Amazon, Apple, Microsoft, Tesla, Alphabet and Meta, along with the MAGS ETF that holds them. x.comÂ
Magnificent Seven stocks face continued pressure as AI capex keeps eating their free cash flow with no sign of slowing, and the market is not rewarding the builders for now despite the returns. The recipients of that spending in power, grid, chips and materials, such as TSMC, GE Vernova, Micron and ASML, look better. Concern is greatest for Tesla and Meta, whose recent moves seem disconnected and whose AI showcase was embarrassing; Microsoft, Amazon, Apple and Alphabet are less concerning. x.comÂ
The Magnificent Seven's growth, fortress balance sheets and central role in the AI buildout now come at multiples that finally make sense. They have barely bent when high-beta names lose 10% in a session; that resilience makes their valuations down here one of the better opportunities in this market. x.comÂ
Nasdaq-100 tech leaders such as Meta, Alphabet, Nvidia and Amazon trade at an unjustified discount, their lowest premium to the S&P 500 in seven years. The Magnificent Seven's premium has fallen from 1.8x to 1.2x, even though they grow faster than average and deliver significantly higher profitability. x.comÂ
Microsoft is cheap but not a long-term holding, because it is not growing fast enough while Nvidia is cheaper, growing much faster and better positioned. Microsoft may be re-rating, but the backdrop could also push it to a 15x P/E, so for now it is only a tradable situation. x.comÂ
The Magnificent Seven look like a good long into earnings if the long-AI/short-Mag7 pair trade keeps unwinding, since Mag7 and software have been heavily shorted against AI names and may regain momentum. Google is the favorite. Nvidia and Apple are fundamentally preferred over Microsoft and Meta, but Microsoft and Meta offer better risk/reward here; Amazon rounds out the group. x.com x.com x.comÂ