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“Magnificent 7” deflates

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
  • What goes up, eventually goes down
  • Times “change”, but human behavior doesn’t

It has been a euphoric year for major US indices, which remained in positive territory despite the increasingly challenging macro environment this year.

However, most gains were driven by investor hype surrounding AI and came from a narrow selection of stocks labelled by the media as the “Magnificent 7”: Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla,

These leading tech companies have been critical in lifting the S&P 500 and Nasdaq 100 index into double-digit returns. Excluding their contribution, both indices would have reverted to a negative year-to-date performance.

In their recent earnings release, they all posted robust numbers, beating expectations, except for Tesla. It missed estimates across the board as Elon Musk cited high-interest rates as a major reason for the abysmal Q3 results. This setback has seen Tesla’s stock plummet approximately 33% from its 52-week highs.

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Nvidia is also up for a major correction. The leading chipmaker is facing a potential cancellation of a $5 billion China order due to US curbs. This could be the potential catalyst that causes Nvidia to break a critical $395 support level and fall all the way to $375, as it is facing a declining head and shoulders pattern. If it fails to hold the $375 level, this could spell disaster and a potential nosedive to $325.

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The AI mania bubble burst is another major reason as to when these seven heavy hitters are due for or are in the middle of a correction.

Times change, but human behavior does not. Interest from Google trends in key phrases such as “Artificial intelligence” and “AI stocks” had declined substantially since they peaked in June, as visible by a downward pointing red arrow.

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If we illustrate those seven tech giants as one, it would be the “Magnificent 7 ETF”. It has formed a triple top that has failed to break the resistance level three consecutive times, over the past few months, and now the rally is deflating, as triple tops usually do not work in favour of the bulls.

So far, Nvidia and Tesla are leading the downward trend, but others might follow soon.

Traders are facing a dangerous cocktail of high-interest rates, escalating geopolitical conflicts, oil prices spiking, and inflation creeping up again, causing panic among market participants. “Big 7” collectively lost nearly $2 trillion of their market capitalization from their 52-week highs, as this trade is reversing.

As the tech titans tumble, so will the mighty S&P 500, as the group collectively accounts for around 30% of the SPX’s total market capitalization.

Traders can long constituents of the “Big 7” stocks using our:
1x Apple , 2x Apple, 3x Apple

1x Microsoft , 2x Microsoft , 3x Microsoft

1x Facebook , 2x Facebook , 3x Facebook

1x Amazon , 2x Amazon , 3x Amazon

1x Alphabet , 2x Alphabet , 3x Alphabet

2x NVIDIA , 3x NVIDIA

1x Tesla , 2x Tesla , 3x Tesla

Traders can long S&P 500 index using our 3x US 500 , 5x Long US 500 .

Alternatively, they can short one of the “Big 7” stocks using our:

-1x Apple, -3x Apple

-1x Microsoft , -3x Microsoft

-3x Facebook

-3x Amazon

-1x Alphabet , -3x Alphabet

-1x NVIDIA , -3x NVIDIA

-1x Tesla , -2x Tesla , -3x Tesla

Or they can short S&P 500 index using our -3x US 500

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Marketing Lead

Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Head of Communications and Strategy

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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