Meet the Parabolic 7. The Group Leaving the Mag 7 in the Dust

The broad stock market is really taking things into overdrive, and that’s thanks primarily to the new class of heavy-lifters referred to by Ben Emons as the “Parabolic 7.” Indeed, it’s a fitting name for the new leadership group leading tech and the indices higher.

But that’s not to say investors should neglect the Magnificent Seven stocks, which, I think, represent a fantastic value at current levels after appreciating less than the S&P 500, at least on a year-to-date basis. As Pershing Square‘s (NYSE:PS) Bill Ackman puts it, there are some high-quality stocks, especially the subset of the Mag Seven in which Mr. Ackman has been buying, that are cheap right now.

In any case, the Mag Seven is less than magnificent these days, but potentially rich with value. For momentum seekers who aren’t unsettled by parabolas in charts, it’s the Parabolic Seven names that might be more than worth keeping tabs on as they act as a playground for traders and AI investors who don’t think the AI-driven supercycle in semiconductors is over quite yet.

Who are the Parabolic Seven? And are they still worth buying?

The Parabolic Seven consists of Micron (NASDAQ:MU | MU Price Prediction), SanDisk (NASDAQ:SNDK), Advanced Micro Devices (NASDAQ:AMD), Dell Technologies (NASDAQ:DELL), Marvell (NASDAQ:MRVL), Intel (NASDAQ:INTC), and Broadcom (NASDAQ:AVGO).

These seven parabolic movers are up 200%, 496%, 120%, 213%, 223%, 180%, and 14% (note Broadcom shares 18% plunged after a tough post-quarter reaction). With the exception of Broadcom, the names seem way too hot to handle, even as sell-side analysts keep raising their year-ahead price targets.

Either way, what’s most remarkable, at least in my opinion, is that some of the price-to-earnings (P/E) metrics aren’t as inflated as you’d think. Indeed, there’s a lot of real earnings growth going on, but the big question mark is whether the supercycle going on right now will lead to a cyclical bust that’s just as “super” at some point down the road.

A name like Dell Technologies seems more tame with a 31.4 times trailing P/E multiple. In numerous prior pieces, I’ve praised the firm as an underappreciated play on AI servers. And while the secret is now out, I still think the name is most palatable of the Parabolic Seven cohort.

Wait, where was Nvidia?

A stark omission, as I’m sure you’ve probably recognized, is the great Nvidia (NASDAQ:NVDA). It’s not because it’s not a magnificent company or a dominant behemoth in AI chips, especially after the curtain pulled on the RTX Spark line of chips. It’s simply because the stock has not been all that hot year to date, gaining just 10.5% — a return that comes up short of the Nasdaq 100’s 16.7% YTD gain.

Perhaps it’s because Nvidia has seen its shares taper off a bit, at least when you look at the longer-term chart, that the name is a worthy addition to the portfolio. After exhibiting a bit of volatility in the past couple of months, the stock goes for just 31.9 times trailing P/E, making it a relative bargain when you consider Nvidia chips just keep flying off the shelves.

And as the firm targets new growth categories, the company genuinely stands out as having what it takes to adapt and thrive as investors start viewing the AI trade as about more than just chips. It’s all about Jensen Huang’s five-layer cake. And though a plunge in the Parabolic Seven could drag the rest of semis, including Nvidia stock, down with it, I would treat Nvidia stock as a magnificent buy candidate on any dip that comes our way.

Beware of parabolic movers

As Michael Burry bets against semis (by means of the iShares Semiconductor ETF (NASDAQ:SOXX), which includes the Parabolic Seven names) while cautioning from chasing such parabolic moves, perhaps it’s wise to enjoy the Parabolic Seven from the sidelines, at least until the next big correction hits.

Maybe it started Friday, or maybe not, but either way, I think there’s more to the market than just the parabolic movers in the semis. In fact, I think there’s value in high-quality names that have suddenly found themselves in the shadow of the Parabolic Seven. Most notably, Nvidia and the rest of the Mag Seven.