"It's no secret that the S&P 500's amazing bull run of the past several years has been led by the AI tech "Magnificent 7" stocks, which are also the top stocks by market cap. These stocks include some of the first US stocks to crack the trillion dollar market cap valuation ceiling. The Magnificent 7 includes: Apple ( NASDAQ: AAPL), Alphabet (Google) ( NASDAQ: GOOG), Amazon ( NASDAQ: AMZN), Meta Platforms (Facebook) (NASDAQ: META), Microsoft, Nvidia (Nasdaq: NVDA), and Tesla."
"Created in October 2024, The BITA US 500 ex-Magnificent 7 Index was intended to cover a diversified range of large cap stocks. By offering an alternative greater diversification without the AI sector concentrated overweighting to investors an ETF tracking this index could conceivably hedge their potential volatility and risk exposure to the Magnificent 7 stocks if fears over an AI bubble proved to be correct."
The S&P 500's recent bull run has been driven primarily by seven mega-cap AI-related stocks known as the Magnificent 7: Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla. Those seven companies account for more than half of the S&P 500's year-to-date gains; the index's return near 16% falls to roughly 7% when those stocks are removed. Some market observers, including Michael Burry, warn that the AI sector may be a bubble, prompting investors to seek hedges. An ETF tracking the S&P 493 (the S&P 500 excluding the Magnificent 7), such as Defiance Large Cap ex-Mag 7 (XMAG), offers greater diversification. BITA created a US 500 ex-Magnificent 7 index in October 2024 to facilitate such tracking.
Read at 24/7 Wall St.
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