Are the AI, tech trades still the move after Mag 7 losses?

Mega-cap tech stocks took another hit in the sell-off that started this trading week, erasing $650 billion in market cap at a time when investors are beginning to rotate out of the Big Tech. Should investors interpret this environment as a sign to exit from the Magnificent Seven and long-term AI trades?

Josh Schafer breaks down a variety of Wall Street notes, indicating whether the AI trade has reached its bottom stemming from Monday's sell-off and if investors should hunker down for the long-term.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Luke Carberry Mogan.

Video Transcript

Zeroing in on mega cap tech.

Although we're seeing investors question when generative A I will result in revenue for a number of big names.

There are still those that are seeing big buying opportunities in the sector here with more.

We've got Yahoo finance markets reporter Josh Schafer.

Hey Josh.

Yeah, Brad.

So to just put this move in perspective for you looking at some of the large cat tech companies, we were just showing on your screen.

If you looked at NVIDIA Microsoft alphabet and Amazon, those are now all off more than 15% in the last month.

And some of the larger equity strategist we follow and research teams that we follow are starting to come in and say maybe it's time to buy the dip, maybe there's a little bit of an opportunity here.

So Blackrock Investment Institute wrote last night that they're still overweight us equities driven by the A I mega force and they see the sell off preventing buying opportunities.

They essentially think that the recession concerns that are going around the market right now.

Overdone Evercore I SI S. Julian Emanuel has the highest price target for the S and P 500 on the street right now at 6000 still hammering that A I trade right now.

He wrote, we view the current A I Air pocket as an opportunity to gain exposure to a long term secular theme.

Guys.

I think the takeaway here from both Blackrock and Evercore is don't let two days of market action sort of shake what your overall strategy was.

They're not going to let a little bit of economic data and a little bit of a shift in the narrative here sort of change.

What again they think is a secular theme, secular theme.

We're usually talking pretty long term, right?

So if you're a long term buyer in that A I theme, they think it's still constructive to be getting in at this point.

I'm curious what you've made with, with the conversation, conversations, many conversations that you've had with strategists here over the last 24 hours or so.

What do they think is going to be the catalyst for that turnaround?

Are they looking for more?

Maybe some reassurance on Thursday when you take a look at the jobless claims as you look ahead to inflation print or is it more maybe of the technical based bounces that we could, that we could be seeing based on the broader, both depending on who you talk to?

Right?

There's a lot of people that want to look at the Vix right now and say, well, the vix is above 35.

It's moved to Standard de va, we could start going to really technical things, but essentially when you have that big of a ball spike, it's gonna take a little bit to settle.

Then you mentioned the macro data.

Not great this week for much of a catalyst.

Yes, jobless claims.

Sure.

But I think you need to wait another week.

You might need to wait until Jackson Hole to get a better feeling.

Maybe it's NVIDIA earnings, right?

Because one thing that was pointed out that I found interesting, this was from the team over at Goldman Sachs.

They were just simply looking at earnings estimates for these companies and you've seen the price come down, right?

But earnings estimates since June 30 have actually held up pretty good, they, they're up for everyone except Microsoft.

That's what you're looking at on your screen.

Now, this is for DPS for 2025 consensus revisions.

Those are still on the rise.

So what you're looking at is prices coming down.

Earnings estimates are going up.

If we're going to do a basic valuation analysis here, the stocks are getting quote unquote cheaper, they're not quite cheap enough.

If you're looking at a long term median.

Goldman said they're at a 27 P instead of a 24 P. So maybe, I think there's a little bit more of a pullback that some people are waiting for in Big Tech.

I don't think there's a lot of people saying this is the bottom.

There was not a lot of people, there were people saying they want to nibble yesterday, but no one is saying we feel like this is all over.

This is the bottom.

It seems like volatility for the rest of August and some chop probably leading all the way into that fed meeting honestly is what most people are looking at at this point.

Well, volume has something to do with it too, especially if you have a certain amount of traders that are away from the desks.

There's not the same amount of fuel to the beach brad.

They gotta take the last couple off.

Yeah, I know, we know you're going to the beach shot, gotta work on that.