Reversion trade opportunity in Magnificent Seven
The recent multiple contraction in Magnificent Seven stocks presents an attractive entry point for a summer reversion trade, as argued by Alicia Levine of BNY Mellon Wealth Management.
The argument
Levine argued that the market has recently favored the direct hardware and infrastructure beneficiaries of AI capital expenditure over the hyperscalers doing the spending. This has left the mega-cap tech spenders unloved and sitting on key support levels, setting them up for a tactical rebound.
The thesis, stress-tested
✓ What validates it
- ✓Hyperscalers demonstrating monetization of AI spend in upcoming earnings
- ✓Magnificent Seven stocks bouncing off key technical support levels
▸ Risks discussed
- ▸High concentration and correlation across global indices (US and EM) due to AI dominance
- ▸Hardware stocks becoming expensive relative to historical multiples
Hear it yourself
"The funding and the spending on AI is coming from these hyperscalers, you know, hundreds of billions of dollars estimates eight hundred billion dollars this year. And it's going to fund other companies, right, the products of other companies."
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