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Magnificent Seven Stocks Vs FAANGs ETFs in 2024

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Topic: FAANG
Publication Type: ETP and Industry
Magnificent Seven Stocks Vs FAANGs ETFs in 2024

In the dynamic landscape of financial markets, 2024 unfolds as a crucial year for investors, presenting a captivating duel between two prominent investment options—the Magnificent Seven and FAANG ETFs. The Magnificent Seven, a coalition of powerful companies spanning various industries, goes head-to-head with the renowned FAANGs (Facebook, Apple, Amazon, Netflix, Google) ETFs, offering investors distinct opportunities and challenges.

As the global economy continues to evolve, this article navigates through the intricacies of both investment choices, delving into their individual performances, inherent risks, and the overarching market trends shaping the investment climate.

Companies Make Up the “Magnificent Seven” Stocks

The term "Magnificent 7" refers to a collection of top-performing U.S. stocks, namely Microsoft, Amazon, Meta (formerly Facebook), Apple, Alphabet (the parent company of Google), Nvidia, and Tesla. They have lived up to their name in 2023.

The origin of the term "Magnificent Seven" traces back to the iconic 1960 Western film, "The Magnificent Seven," directed by John Sturges. In this cinematic classic, seven American gunmen are hired to defend a small Mexican village against marauding bandits. The term has found new life in the financial realm, specifically within the technology sector, to describe a group of seven exceptionally high-performing and influential stocks.

Coined by Bank of America analyst Michael Hartnett in 2023, the term encapsulates companies recognized for their market dominance, technological impact, and significant contributions to shifts in consumer behavior and economic trends. The notable members of this contemporary "Magnificent Seven" include Alphabet (GOOGL; GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), NVIDIA (NVDA), and Tesla (TSLA).

Magnificent Seven Performance in 2023

In 2023 the magnificent seven stocks significantly outperformed the performance of major U.S. indexes. A notable catalyst for this success was the advancements related to artificial intelligence (AI) within several of these companies.

Following a challenging 2022 for U.S. markets, marked by the S&P 500's weakest performance since the Great Recession, 2023 witnessed a remarkable market rebound. The S&P 500 index surged by over 24.87% as of December 27, 2023, propelled by substantial gains from the renowned "Magnificent 7." (Source: S&P 500).

Notably, Nvidia's shares demonstrated exceptional growth, tripling in value since the beginning of 2023, while Meta and Tesla more than doubled year to date.  During the same period, Amazon stock surged by 80%, and Apple, Alphabet, and Microsoft experienced nearly 60% growth.

In stark contrast, the remaining 493 stocks consisting of the S&P 500 index, humorously referred to as the "Meager 493" by Mike Dickson, Head of Research at Horizon Investments, collectively exhibited a modest gain of just 7.5% by the first week of December 2023. This stark divergence in performance underscores the significant impact of the Magnificent 7 in driving the broader market resurgence, reflecting their dominant influence and robust performance throughout the year.

In 2023, the S&P 500 index gained 20%, and 76% of that gain can be attributed to seven specific stocks. These seven companies collectively have a market value of $11.5 trillion. (Source: Business Insider).

Source: Bloomberg, as of 12/01/23

Bearish and Bullish Investors

Performance of Magnificent Seven Stocks

Stocks

6 months

1 Year

5 Years

Microsoft

12.24%

60.35%

274.60%

Amazon

20.29%

80.04%

108.19%

Meta

27.72%

211%

169.95%

Apple

2.26%

53.82%

396.36%

Alphabet

17.98%

63.35%

168.51%

Nvidia

21.51%

253.39%

1,384.74%

Tesla

-1.29%

125.52%

1,041.87%

Source: Google Finance as of December 28, 2023.

FAANGs ETFs: Navigating Market Dynamics

The landscape of investment has been significantly shaped by the emergence of FAANGs ETFs, an investment vehicle that pools together the collective strength of the iconic FAANG stocks – Facebook (Meta), Amazon, Apple, Netflix, and Google's parent company, Alphabet. These ETFs offer investors a diversified and simplified approach to gain exposure to these tech giants, enabling them to capitalize on the combined performance of the FAANG stocks.

The historical performance of FAANGs ETFs has been closely linked to the success of individual FAANG components, with their collective influence on the technology sector making them a focal point for many investors seeking growth opportunities. As we delve into this section, we explore the dynamics of FAANG's ETFs, analyzing their historical performance, diversification benefits, and the broader market trends influencing their trajectory.

FAANGs ETFs function as investment instruments that mirror the performance of the FAANG stocks. Investors can gain exposure to the technology sector through a single investment vehicle, thereby mitigating risk and achieving diversification.

Graniteshares FAANG ETPs for 2023 surged by 90.56% offering investors a diversified and efficient way to gain exposure to some of the most influential and high-performing technology companies in the market. These ETPs provide a convenient avenue for individuals to participate in the growth potential of leading tech giants, benefiting from their innovation, strong financial performance, and global market impact. (Source: Graniteshares)

Expectations for 2024

According to the analysts from UBS, Goldman Sachs, and CNBC states that the Magnificent Seven" tech stocks in 2024 will continue to outperform the remainder of the S&P 500 driven by the Artificial Intelligence (AI) boom.

In terms of AI expectations in 2024 and beyond, generative AI emerges as a disruptive and potentially revolutionary technology. Historical patterns reveal that the introduction of novel technologies has consistently generated value across various sectors within the innovation value chain. Generative AI stands as the most recent illustration of a groundbreaking technology, driven by infrastructure and inputs, leading to the development of innovative hardware on platforms managed by operators and enablers. This progression brings widespread economic benefits to the overall economy.

Anticipated growth in global AI demand is substantial, projected to surge from USD 28 billion in 2022 to an impressive USD 300 billion by 2027, as indicated by data from Bloomberg Intelligence. This forecast reflects a robust compound annual growth rate (CAGR) of 61%.

Within this trajectory, the AI infrastructure segment is expected to experience a notable growth of 38%, while the applications and models’ segment is projected to soar by an impressive 139%. Notably, there is identified upside risk to these estimates, propelled by an increasingly clear outlook on infrastructure spending and the expanding demand for AI applications across various sectors. (Source: UBS)

Microsoft (MSFT)

The shares of technology behemoth Microsoft have experienced a remarkable ascent, recording nearly a 60% gain throughout the year 2023 and reaching multiple record highs. This surge is attributed, in part, to the heightened interest surrounding AI.

Microsoft

Source: Tradingview as of Jan 2, 2024

Microsoft's position as a significant player in the AI landscape is fortified not only by its proprietary AI tools and hardware but also by its strategic partnership with OpenAI, the creator of ChatGPT. The collaboration, marked by a "multiyear, multibillion-dollar investment to accelerate AI breakthroughs," has garnered substantial attention from investors, contributing to Microsoft's leadership in the competitive AI arena.

Microsoft's momentum in AI is set to continue in 2024, buoyed by its robust partnership with OpenAI. The company's commitment to advancing AI technologies, coupled with the potential for groundbreaking announcements, positions Microsoft as a frontrunner in the ongoing AI race, ensuring sustained interest from investors in the coming year.

Google - Alphabet (GOOGL)

In 2023, the shares of Google's parent company, Alphabet, have surged by almost 60%, driven by growing enthusiasm for the company's strides in AI. Alphabet's AI-related achievements have been notable, featuring the launch of Bard, a chatbot, and Gemini, a large language model (LLM).

Google - Alphabet (GOOGL)

Source: Tradingview as of Jan 2, 2024

In February 2023, Bard was introduced, despite a less-than-perfect initial demonstration, Bard underwent updates, establishing itself as a credible alternative to ChatGPT. Additionally, in early December, Alphabet unveiled Gemini, its proprietary LLM AI model, showcasing superior performance compared to OpenAI's GPT-4.

Looking ahead to 2024, Google has disclosed plans to introduce Gemini Ultra, described as the "largest and most capable model for highly complex tasks," following further fine-tuning. This advanced model is slated to power Bard Advanced, emphasizing Google's ongoing commitment to advancing artificial intelligence and pushing the boundaries of sophisticated AI models. These developments underscore Google's dedication to maintaining a leading position in AI innovation and providing users with increasingly powerful tools.

Amazon (AMZN)

In 2023, Amazon's stock surged by 87.5%, propelled by significant strides in the AI space. The introduction of Bedrock through Amazon Web Services (AWS) marked a notable move, offering a fully managed service facilitating access to leading foundation models for generative AI applications. Amazon strengthened its AI presence with the launch of Q, a GenAI assistant on AWS, and the unveiling of custom-designed AWS chips optimized for GenAI applications in November 2023.

Amazon

Source: Tradingview as of Jan 2, 2024

Amazon further enhanced its AI capabilities with a substantial multi-billion-dollar investment, committing up to $4 billion in funding for Anthropic, an AI firm making waves in the industry. This strategic move positions Amazon for effective competition with Microsoft's ChatGPT and Google's Bard. In response to reports about the development of an LLM named Olympus, Adam Selipsky, AWS CEO, confirmed plans for multiple iterations of first-party models.

Nvidia (NVDA)

In 2023, Nvidia distinguished itself among the Magnificent 7 as a significant beneficiary of the AI boom, experiencing substantial share movement, including a notable 24% surge on May 25, 2023, following robust first-quarter earnings and heightened demand. Nvidia YTD The chipmaker's dominance in AI training is estimated to exceed 90% of the market share, with its chips extensively utilized in building AI models and integrating AI tools.

Nvidia

Source: Tradingview as of Jan 2, 2024

Nvidia unveiled its most powerful GPU, the H200, in November, designed to power AI models for major players such as Amazon, Google, and Microsoft. Despite concerns about U.S. restrictions on AI chip exports to China, analysts affirm that Nvidia's gains in the AI boom will contribute to profitability. Jefferies analysts favorably position Nvidia as the "franchise pick," asserting its best positioning compared to rivals like Intel and AMD. While competitors make strides, Wedbush analysts maintain that Nvidia is poised to emerge as a winner in the ongoing competition.

Meta Platforms (META)

In 2023, Meta, the parent company of Facebook, witnessed a remarkable surge in its shares by 211% YTD, nearly tripling as it actively embraced the AI landscape. In February, Meta introduced LLaMA, a large language model (LLM), leveraging AI technology to enhance algorithms and advertising systems.

The company emphasized that AI serves as a foundational component across Meta's apps and services, contributing to improved performance, measurement, and campaign setup, as stated in an official release. CEO Mark Zuckerberg highlighted that AI recommendation tools played a pivotal role in increasing user engagement on Meta platforms.

Meta's AI efforts have primarily focused on enhancing recommendations and rankings that power its entire ecosystem. CFRA analysts anticipate that over time, Meta can monetize AI through initiatives like Llama 2, AI agents, and the metaverse. The firm expresses optimism about Meta's initiatives, particularly in developing a content-driven discovery platform.

Tesla (TSLA)

In 2023, Tesla witnessed a near doubling of its shares, driven by the company's well-established position in electric vehicles. While Tesla did not unveil many significant AI projects during the year, the company, known for its electric vehicles, heavily relies on AI technology for autonomous driving capabilities. CEO Elon Musk, a vocal proponent of AI, has emphasized its transformative potential, envisioning a future where AI can perform virtually every task.

Tesla

Source: Tradingview as of Jan 2, 2024

In July 2023, Musk launched xAI, an AI-focused company operating closely with X (formerly Twitter) and Tesla. The introduction of Grok, an AI chatbot, followed in November, although it is not widely available yet. Despite Tesla's strong performance, Bernstein analysts express caution, suggesting that shorting Tesla could be the "best idea" for 2024.

Apple (AAPL)

Apple, although not yet unveiling its own AI chatbot like some counterparts in the Magnificent 7, has confirmed active engagement with AI technology, leading to a nearly 50% gain in shares in 2023. In a May earnings call, CEO Tim Cook expressed Apple's commitment to weaving AI into its products thoughtfully and acknowledged ongoing work on a potential chatbot release.

Apple

Source: Tradingview as of Jan 2, 2024

Despite Apple's relatively subdued presence in the AI race, analysts project a profitable 2024 for the tech giant, fueled in part by the success of the iPhone 15 boosting holiday sales. Wedbush analysts identify the coming fiscal year as a golden opportunity for Apple investors, citing approximately 240 million iPhones globally eligible for an upgrade, estimating a standalone value of $1.5 trillion to $1.6 trillion. This optimistic outlook indicates a re-acceleration for Apple into 2024.

Leverage FAANG ETPs by GraniteShares

Leverage Tesla ETPs by GraniteShares

Product name Ticker
USD EUR GBX
GraniteShares 3x Long Tesla Daily ETP 3LTS 3LTE 3LTP
Graniteshares 3x Long Microsoft ETP 3LMS 3LME 3LMP
Graniteshares 3x Long Amazon ETP 3LZN 3LPE 3LZP
Graniteshares 3x Long NVIDIA ETP 3LNV 3LNV 3LVP
Graniteshares 3x Long Apple ETP 3LAP 3LAE 3LWP
Graniteshares 3x Long Facebook ETP 3LFB 3LFP 3LFP
Graniteshares 3x Long Alphabet ETP 3LAL 3LAL 3LGP
GraniteShares 3x Short FATANG Daily ETP 3SFT 3S3E 3S3P
GraniteShares 3x Long FATANG Daily ETP 3FTG 3FTE 3FTP
GraniteShares FATANG ETP FTNG FTNE FTNP
GraniteShares 1x Short FATANG Daily ETP SFTG SFTE SFTP

 

 DISCLAIMER

This is a disclaimer stating that all trading and investing comes with risks. Always do your research and do not invest more than you can afford to spend.

GraniteShares accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this blog or the contents. GraniteShares Limited (“GraniteShares”) (FRN: 798443) is an appointed representative of Messels Limited which is authorised and regulated by the Financial Conduct Authority.

This blog does not constitute an offer to buy or sell or a solicitation of an offer to buy securities in any company. Nothing contained herein constitutes investment, legal, tax or other advice nor is to be relied upon in making an investment or other decision. No recommendation is made positive or otherwise, regarding individual securities or investments mentioned herein. Any summary list of risk factors does not purport to be a complete enumeration or explanation of the risks involved in a particular investment. Prospective clients must consult with their own legal, tax and financial advisers before deciding to invest. This email contains the opinions of the author and such opinions are subject to change without notice. The source of data is GraniteShares unless otherwise stated. No guarantee is made to the accuracy of the information provided which has been obtained from sources believed to be reliable. This email and the information contained herein is intended only for the use of persons (or entities they represent) to whom it has been provided. Past performance is not a reliable indicator of future results.  The value of an investment may go down as well as up and can result in losses, up to and including a total loss of the amount initially invested. Investments may involve numerous risks including, among others, company risks, general market risks, credit risks, foreign exchange risks, interest rate risks, geopolitical risks and liquidity risks.  Please note that GraniteShares short and leveraged Exchange Traded Products are for sophisticated investors.

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