While the so-called Magnificent 7 — an elite club of publicly traded enterprises — should remain powerfully relevant for the long haul, a focused approach could offer a superior solution. Enter “MnM” stocks, a new artificial intelligence-centric grouping that Raymond James analyst Josh Beck coined. This trio consists of Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Meta Platforms (NASDAQ:META). And it’s already making big waves.
Of course, Microsoft garnered much interest thanks to its significant investments in OpenAI, the creator of ChatGPT. With the underlying generative AI market set to command a valuation of $1.3 trillion per a Bloomberg report – and simultaneously representing a compound annual growth rate (CAGR) of 42% – MSFT soared about 55% in the past 52 weeks. Certainly, generative AI requires intense processing capabilities, accelerating Nvidia to a 37% year-to-date performance.
However, at the moment, Meta Platforms dominates business headlines. On Thursday, Meta delivered blockbuster fourth-quarter earnings, which saw net income more than triple to $14 billion. On a per-share basis, earnings hit $5.33, beating Wall Street’s target of $4.96. In addition, revenue clocked in at $40.1 billion, above the $39.18 billion anticipated by market experts.
Further, the company didn’t ignore its dominant social media network, Facebook, which beat targets for daily and monthly active users. Plus, Meta generated an average revenue per user (ARPU) of $13.12, above the consensus target of $12.81.
As if that news wasn’t enough, Meta will also pay investors a dividend of 50 cents a share on March 26.
MnM Stocks Take the Best From the Magnificent 7
To be clear, neither the Magnificent 7 nor the former FANG designation should be considered irrelevant. However, it’s difficult not to notice that certain previously heralded enterprises have suffered setbacks. Regarding the latter category, one of the members — streaming giant Netflix (NASDAQ:NFLX) — encountered relatively stagnant growth between Q4 2021 and Q3 2022. That may indicate the low-hanging fruit has been plucked.
For the former category, while the Magnificent 7 remains a news-cycle driver, some of its members have also fallen a bit short. Per CNBC, Apple (NASDAQ:AAPL) suffered a hit earlier this week after it disclosed a 13% decline in sales in China. Also, while Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) dominates the internet, its YTD performance has been lackluster compared to the MnM stocks.
Indeed, MSFT is the “worst” of the bunch at about 11% up. It also doesn’t help Alphabet’s cause that ChatGPT is the most popular chatbot at the moment.
That’s not all. Electric vehicle (EV) manufacturing stalwart Tesla (NASDAQ:TSLA) — long a sterling example of a Magnificent 7 member — is uncharacteristically struggling for traction. Earlier, the company reported adjusted earnings per share of 71 cents on revenue of $25.17 billion. Both results missed their respective consensus targets. Further, Tesla issued a statement that vehicle volume growth may be lower than in 2023 due to the development of a next-generation vehicle.
TSLA stock fell more than 26% YTD, with the underperformance coming amid a winter season wreaking havoc on EV owners.
Why It Matters
Still, while MnM stocks may be taking the best from the Magnificent 7, they’re also heavily dependent on AI. While that’s obviously led to incredible upsides for the individual names, people are discovering more flaws in digital intelligence. Should this become a trend, the broader diversification of the Magnificent 7 may be more desirable.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
