CEO Of Norway's Sovereign Wealth Fund Advises Investors To Dump Tech Stocks

You may not have heard of Nicolai Tangen, but his name carries immense weight in the world of investing. He's the CEO of Norway's sovereign wealth fund, a financial juggernaut that is worth nearly $2 trillion. It is the largest of its kind in the world and as you might imagine, investor's ears perk up whenever he speaks. His latest advice might come as quite a surprise. Nicolai thinks you should dump tech stocks.

That advice seems even more curious when you consider that the fund he's responsible for managing owns $173 billion in Magnificent Seven stocks. The Magnificent Seven's current makeup is a who's who of big tech. It includes companies like Google, Meta Platforms META, Amazon AMZN, and Nivida NVDA. More to the point, Mag Seven stocks powered a major stock market boom in 2024. So, why is he telling investors to be cautious?

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Tangen made his comments at the recent World Economic Forum in Davos, Switzerland, which hosts most of the world's wealthiest families, investors, and business moguls. Speaking to Bloomberg, Tangen said, "The best thing to do is always to do the opposite of everybody else. What will that be today? Well, if you were to do the opposite of everybody else, it would be to sell the US tech stocks, buy China, sell private credit, just buy stuff that is out of fashion."

Simply put, Tangen is telling investors to do the opposite of what he's done to build wealth for Norges Bank Investment Management. Like many big funds, it has been riding the profit wave the Magnificent Seven has generated since the emergence of AI. According to Bloomberg, Norges Bank's six largest investments are Magnificent Seven stocks. That's in addition to $5.6 billion in Tesla TSLA shares.

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As recently as last summer, Norge Bank's semi-annual report was touting the growth of its tech portfolio, which was up almost 28% at the time. With that said, there is more than just a contrarian streak behind Tangen's warning on the Magnificent Seven. Like any wise investor, he's riding the tech wave while also keeping a watchful eye out for signs of a bubble that could pop.

Although tech has been booming, there is a high degree of interconnectivity between the top companies in the Magnificent Seven. They are almost all involved in a race to improve AI or provide services for AI's advancement. That interlinks their fates with chip and semiconductor makers like Nvidia, Taiwan Semiconductor Manufacturing TSM and Advanced Micro Devices AMD. That's great for these companies as they explode in value, but it ties a lot of the stock market's wealth into one single sector.

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According to Fortune Magazine, the Magnificent Seven accounts for nearly 33% of the S&P 500's total value. The profit they generated represents 75% of the S&P 500's growth in earnings for 2024. It's not hard to see why Tangen is concerned when you consider the flip side of that coin. Hundreds of billions of dollars in investor wealth will disappear very quickly the next time there is a major market correction or a sector-wide downturn.

Tangen sees that risk very clearly. During an interview with the Financial Times Unhedged podcast, Tangen warned, "The concentration is absolutely worrying. It means that there is a risk in the stock market which we have never seen before. So, there are very few companies tied into them, and they are getting bigger and bigger and more and more important."

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