New York University finance professor "sells goods" leading the rise of the U.S. stock market's "Magnificent Seven": buying on dips is the right strategy
Aswath Damodaran, a finance professor at New York University, stated that the "Magnificent Seven" tech giants in the U.S. stock market are a good buying opportunity during market adjustments. He believes these companies will continue to generate strong cash flows, with solid fundamentals, especially the seven tech giants including NVIDIA, which have strong profitability. He advises investors to buy these companies on dips during market downturns to drive growth in the U.S. economy and the U.S. stock market
According to the Zhitong Finance APP, a finance professor from New York University, known globally for broadening the valuation system of financial markets, stated that the "Magnificent Seven" tech giants in the U.S. stock market present an excellent buying opportunity during stock market adjustments, as most of them will continue to achieve strong profit growth trends and their fundamentals are "rock solid."
Aswath Damodaran, a finance professor at NYU Stern School of Business, recently said in a media interview: "As a long-time value investor, I have never seen profit machines as incredibly lucrative as these large tech companies, whose fundamentals are so strong. And I believe the growth momentum of these profit machines will not weaken."
"The market will always experience some degree of adjustment. I suggest that when this happens, you should at least find a way to increase your holdings in one of these giants, or perhaps two to three would be even more appropriate, as they largely drive the upward momentum of the U.S. economy and the entire U.S. stock market," the NYU finance professor added.
Damodaran also mentioned in the interview that the seven tech giants, including AI chip leader NVIDIA, have "extremely rich profit scales," and he remains firmly invested in these seven tech giants.
The "Magnificent Seven," which dominate the S&P 500 and Nasdaq 100 indices, include: Apple, Microsoft, Google, Tesla, NVIDIA, Amazon, and Meta Platforms. They are the core driving force behind the S&P 500's record highs.
These tech giants, representing the forefront of human technological power, have dominated the global tech investment boom in recent years and have led the artificial intelligence investment frenzy since 2023. Investors are betting on the wave of generative AI as global companies invest heavily in this trend. With their large market scale and strong financial strength, tech giants like NVIDIA, Apple, and Google are in the best position to leverage AI to expand their revenue scale.
Looking at the entire U.S. stock market, the "Magnificent Seven" have been the core driving force behind the rise of U.S. stocks since 2023. With their unparalleled AI revenue scale, rock-solid fundamentals, years of strong free cash flow reserves, and continuously expanding stock buyback programs, they have attracted a flood of global capital.
It is no exaggeration to say that they are the biggest contributors to the long-term bull market in the U.S. stock market. According to the expectations of finance professor Damodaran and major Wall Street firms, these giants may continue to lead the U.S. stock market to new highs by 2025. The Barclays strategy team recently predicted that, driven by the strong profit growth trend of large tech giants and the resilience of the U.S. economy, the S&P 500 index will rise another 10% next year, reaching 6,600 points UBS's analysis team stated that the technology sector, home to the seven major tech giants, remains the preferred sector in the U.S. stock market, with expected gains next year likely to exceed the broader U.S. market—the S&P 500 index. UBS predicts that the S&P 500 index could reach 7,000 points by 2025.
The Bloomberg index measuring the gains of these seven tech giants doubled in 2023 and has surged about 60% so far this year. This means that if a portfolio has steadfastly held these seven tech giants since 2023, the investment return has doubled, achieving as much as 60% profit this year.
It is noteworthy that Tesla, led by Elon Musk, has been in a downward trend for most of 2023, and at one point was removed from the "Magnificent Seven" by some major Wall Street firms. However, everything changed dramatically after Trump won the U.S. election in November; since then, Tesla has become the strongest-performing stock among the seven tech giants, driving the S&P 500 index and the Nasdaq 100 index to new highs.
As investors generally bet that Donald Trump's return to the White House will have a significant positive impact on Musk's companies, particularly in accelerating the U.S. federal government's approval process for Tesla's FSD and Robotaxi, Tesla's stock price has surged over 40% since November. Musk has previously funded Trump's presidential campaign and is an advisor to the elected president.
For bullish investors on Tesla's stock and Musk fans, Trump's return to the White House, along with his announcement that Musk will lead the "U.S. Government Efficiency Department," will fundamentally change the narrative for Tesla and Musk's companies in the coming years regarding artificial intelligence, autonomous driving, and Tesla's AI supercomputing system. They believe that the long-standing regulatory challenges Musk has complained about, such as "federal government inefficiency" and the slow progress of regulatory reviews for Tesla's FSD and Robotaxi, may welcome a "qualitative" acceleration in reviews. Wedbush Securities, a top investment firm on Wall Street known for being "Tesla loyalists," significantly raised its 12-month target price for Tesla from $300 to $400 after Trump's victory