After Wednesday’s painful market-wide sell-off, investors seem more willing than ever to give up on the big-tech trade. Indeed, the Magnificent Seven was crushed as two members reported quarterly results that failed to impress.
As portfolios concentrated in these names look to diversify into some of the mid-and large-cap top performers, perhaps it’s the non-magnificent stocks’ time to shine.
Though I don’t think a rougher-than-expected earnings season for the Magnificent Seven members will lead to the “bursting” of the AI bubble, I do think the bar gets markedly higher for mega-cap tech to pass here.
Whenever valuation multiples expand, as they have in the first half, you can count on a tougher crowd nitpicking every fine detail for the slightest sell-worthy imperfection.
The Magnificent Seven’s earnings season is off to a rocky start. And as more results come due from the cohort, perhaps it’s time to show more appreciation for the rest of the market winners. Here are three that are beating their larger-cap peers.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) shares have been caught up in the furious selling this week, with SMCI stock down more than 9% on Wednesday. Despite the steep single-day drop, the name is still up around 154% year-to-date. That kind of gain even tops the great Nvidia (NASDAQ:NVDA), which is up 132% so far this year.
Undoubtedly, SMCI stock seems more like a name to avoid than one to buy on weakness as the tech momentum accelerates to the downside. Sometimes the fastest cars in the race have the biggest risk of skidding and even crashing. And with an elevated 1.27 beta, investors should know the name accompanies more market risk and a rougher ride in Wednesday’s session.
In any case, the AI server maker remains a top growth company as the intelligent data center continues its meteoric rise. For now, perhaps it’s best to be cautious when going against the grain with the Nasdaq 100’s newest member.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a networking firm that’s been firing on all cylinders lately. On Wednesday, though, ANET stock pared 6% of its gains, falling in sympathy with most other high-tech high-flyers. Despite the rough session, shares of ANET are still up a respectable 39% year-to-date. Recent turbulence may just produce that terrific buying opportunity that investors who missed the 2024 run have been waiting for.
Though Arista has still been outdone by Nvidia so far this year, the $102 billion firm has still outdone the other six of the Magnificent Seven. And if this tech sell-off still has legs, perhaps ANET can better withstand the wave of volatility.
Recently, Citi’s (NYSE:C) Atif Malik praised ANET stock, hiking his price target to $385 from $330. He noted the firm’s opportunity to cash in on the AI boom from the networking side. At 41.3 times forward P/E, perhaps shares aren’t as expensive as they could be, given the magnitude of such an opportunity.
Eli Lilly (LLY)
Eli Lilly (NASDAQ:LLY) is a big name in its own regard, with a $774 billion market cap. Still, it’s not a Magnificent Seven member, even though it probably deserves to be, with Tesla (NASDAQ:TSLA), once again, dropping the ball on its latest quarter while LLY stock is up more than 48% year-to-date.
The GLP-1 innovator behind such drugs as Mounjaro couldn’t avoid sliding on Wednesday’s session, sliding 2.1% on the day. Nevertheless, shares of the biotech giant managed to outperform the S&P 500, which was down slightly more. Perhaps lingering enthusiasm surrounding China’s approval of its weight management drug tirzepatide helped LLY stock fall to a lesser extent than the AI-related high-flyers.
As Lilly continues wheeling and dealing while seeking to defend its turf in the GLP-1 drug market, perhaps the modest 2% dip is worth getting behind.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.