Technology investors should not overlook the market chatter that Magnificent 7 may become 5. Tesla (TSLA) and Apple (AAPL) are down year-to-date but are up significantly in the last few years. Although they, along with Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG), and Meta Platforms (META), are all strong firms, business conditions may change.
Markets are worried that Tesla will need to keep cutting vehicle prices to match supply with demand. Skeptics are questioning Apple’s resiliency in China. China’s economy is in a multi-year slowdown that worsened after the Covid lockdowns ended.
What will investors buy if two or more of the M7 stocks continue to sell off?
Buy Energy
Investors will re-consider old-fashioned industries. Energy firms, especially utilities, will thrive as electricity demand rises. EVs and AI servers alike need electricity to run. Consolidated Edison (ED), which trades in a range of $88 – $94, is attractive today. Other regulated utilities include Southern Company (SO), Duke Energy (DUK), and American Electric Power (AEP).
Indirectly, the oil sector is a good alternative to the mega tech firms. Investors may wait for firms like Exxon Mobil (XOM), Shell (SHEL), and Petroleo Brasileiro (PBR) to pull back before starting a position.