This 'Magnificent 7' ETF Is Riding High On Nvidia's AI Surge — Analysts See Room For More Growth

The latest earnings report from Nvidia Corporation NVDA has not only boosted the company’s stock but also sparked interest in the Roundhill Magnificent Seven ETF MAGS.

What Happened: Nvidia’s fourth-quarter earnings report, released on Wednesday, showed a significant increase in chip demand for AI projects. The Roundhill Magnificent Seven ETF, which includes Nvidia among other tech giants, also saw a substantial increase, rising over 4% and experiencing a record daily volume of 280,000 shares traded, CNBC reported.

David Mazza, chief strategy officer at Roundhill Investments, said, "We remain confident that these names, even absent Tesla's recent underperformance, are reflective of the Magnificent 7.”

UBS global wealth management CIO for the Americas, Solita Marcelli, believes that despite a 24% rise in the tech-heavy Nasdaq, there is still potential for further growth in tech stocks, especially those tied to the AI revolution.

"If you choose not to own one of those, well that's hundreds of basis points of portfolio allocation that you can still be exposed to growth and technology — and even AI, potentially — with other technology companies," said Andrew Stewart, CIO at Exchange Capital Management. 

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The Roundhill ETF, which has an expense ratio of 0.29%, has seen a 9% increase year-to-date, even before the recent surge. The fund’s success has continued in 2024, with $99 million in inflows pushing its total assets over $140 million.

Despite concerns about the market’s concentration in a few large stocks, the Roundhill ETF’s success suggests that investors are still eager to buy into the Magnificent Seven.

Why It Matters: The Roundhill Magnificent Seven ETF reportedly offers equal-weight exposure to the "Magnificent Seven" stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.

The surge in demand for the Roundhill Magnificent Seven ETF follows Nvidia’s impressive earnings report. However, this surge may not be without its risks.

Short-seller Jim Chanos recently highlighted a potential risk regarding Nvidia’s reliance on the other Magnificent 7 companies, suggesting that most of Nvidia’s operating cash flow could be capex from other Mag 7 darlings. This dependency could pose a risk to the sustainability of Nvidia’s growth.

Despite these concerns, analysts are still bullish on Nvidia’s future, especially in the AI sector. The company’s strong performance in its fourth quarter financial results has been attributed to robust supply and demand dynamics, with analysts anticipating a significant upside in the shares.

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