www.bloomberg.com
To outperform the market recently, many investors bought the largest US technology stocks. This “Magnificent Seven” (or mega-cap) strategy worked exceptionally well, as these stocks consistently lifted the S&P 500 to new highs. Their dominance was largely driven by the artificial intelligence boom, which heavily favored companies like Nvidia, Microsoft, and Meta. Additionally, these tech giants benefited from high interest rates, as their strong balance sheets and massive cash flows allowed them to thrive while the rest of the economy struggled. However, analysts warn that this concentration poses a risk, as it leaves investors vulnerable if tech slows down or the broader economy weakens.
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