Magnificent Seven Stocks Face Scrutiny, Lower Exposure Recommended

As the once-robust Magnificent Seven trade falters in 2023, investors are urged to reassess their positions.

Only Meta has rallied double digits year-to-date, while Amazon ekes out a modest 5.2% gain. In contrast, Alphabet, Apple, Nvidia, Microsoft, and Tesla have all declined, averaging a drop of 3%.

Concerns fueling the sell-off include:

* Declining Tesla sales
* High capital expenditures for AI infrastructure (Meta, Microsoft, Amazon, Alphabet)
* Elevated valuations (42% premium to S&P 500)
* Over-ownership by investors (44.7% beta-adjusted exposure)

Trivariate Research CEO Adam Parker highlights these concerns and recommends reducing exposure for the following reasons:

* Heightened scrutiny of AI spending in the coming years
* Increased sensitivity to market volatility
* Misalignment between bearish fundamentals and bullish analyst sentiment

Parker's analysis reveals that analyst recommendations for the Magnificent Seven are overwhelmingly positive, with only 4.8% of 504 recommendations being Sell-rated.

Given these factors, investors are advised to reconsider their allocation to the Magnificent Seven stocks and potentially lower their exposure to mitigate potential risks.