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Hedge funds are bailing on Magnificent 7 stocks

Positioning in the group recently sank to fresh one-year lows, according to Goldman Sachs.

Luke Kawa

The megacap tech stocks underpinning the bull market in US equities — Apple, Nvidia, Microsoft, Google, Amazon, Meta, and Tesla — are increasingly out of favor among the hedge-fund community.

Scott Rubner, managing director for global markets at Goldman Sachs, flagged that hedge-fund positioning in the so-called “Magnificent 7” stocks is at fresh one-year lows, citing data from the bank’s prime brokerage.

GS PB Data
Source: Goldman Sachs

“Hedge funds have (relatively) left this set of the market for 1) other AI plays and 2) bigger Trump beneficiaries,” he wrote in a note to clients on Friday.

Interestingly, the Mag 7 cohort as a whole has outperformed the S&P 500 since November 5, but that’s all down to one stock: Tesla.

For passive investors in the S&P 500, this dynamic might be a bit concerning since this group makes up over 30% of the index. We need only to look back to mid-July to see that when investors rotate out of Big Tech into something else (in that instance, small caps), that shift can often be a net negative for the US benchmark gauge.

The good news is that, assuming Goldman’s prime brokerage data is a fair representation of hedge-fund activity at large, it looks like this exodus has taken place without too much in the way of damage at the index level, with the S&P 500 less than 1% below its record closing high as of midday Friday.

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SpaceX gets a wave of bullish ratings from Wall Street analysts

SpaceX received more than a dozen positive analyst calls on Tuesday — including from major Wall Street banks — as they initiate coverage on Elon Musk’s space and AI company.

SpaceX went public on June 12 at a $2.2 trillion valuation, the largest debut in history. While the company hasn’t yet posted a profit, it seems to have convinced Wall Street that it will get there and grow its valuation on the way.

Of the at least 17 analysts that gave a rating on Tuesday, all but one gave it a “buy” or “outperform” rating. MoffettNathanson was "neutral."

The ratings come as SpaceX joined the Nasdaq 100 index, a benchmark tech-heavy basket of companies that underpins millions of portfolios. The inclusion adds built-in demand for the stock from index funds and ETFs.

Still, SpaceX fell more than 5% on Tuesday amid a broader sell-off, and is currently effectively flat from its opening price of $150 a share.

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Nike sinks to lowest level since 2014 after warning of “challenged” sales environment in Q4 report

Did Nike do it?

Investors had a mixed reaction after the global sports apparel company reported its fourth quarter earnings on Tuesday after the bell. Shares initially rose 5% as Nike beat out Wall Street expectations amid a hefty tariff refund bonus. However, the stock then sank to its lowest level since August 2014 in postmarket trading.

Here are the Q4 numbers:

  • Revenue of $11.0 billion (estimate: $10.8 billion).

  • Adjusted earnings per share of $0.20 (estimate: $0.12).

Ahead of this report, Nike warned that results would be flattered by a one-time tariff refund (now estimated at roughly $0.52 per share for the bottom line). That gave the company an extra cushion in snapping its streak of seven quarters of year-over-year profit declines.

Over the past year, the company had been punished by tariffs on imported goods, stagnant consumer spending, and increasing competition from other footwear brands like New Balance, Adidas, and Hoka.

Outgoing CFO Matthew Friend deemed it an “increasingly challenging operating environment, where sell-through remains challenged.”

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