This hot tech stock just kicked Tesla out of the S&P 500 Magnificent Seven. Should I buy it?
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If you’ve ever watched a horse race, you know how exciting it is to see a dark horse beat the pre-race favorite and take home the prize money. Much of the excitement is wrapped up in finding out how much money those who bet wisely on unexpected horses will pay out. Broadcom (NASDAQ: AVGO) shareholders likely feel the same way. That’s because the company just removed Tesla from the S&P 500 Magnificent Seven.
The S&P 500 Magnificent Seven is a group of seven of the most valuable tech giants in terms of market capitalization. Members of the Magnificent Seven typically have large market shares in their fields as well. The overall performance of these stocks is viewed by many as an indicator of how well the technology sector is performing as a whole. Technology has become such a powerful economic driver that being a member of the Magnificent Seven carries a huge amount of cash.
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Companies wear the Magnificent Seven as a badge of honor and increase their visibility with investors. All these things usually have a positive impact on stock value, so they are always a big issue when new members join the club. Broadcom, which makes hardware and software for the computer industry, has benefited from the advent of AI and its value has soared.
According to a recent article in Fortune magazine, Broadcom’s market capitalization reached $803 billion in early October, slightly more than Tesla’s then-valued valuation of $786 billion. Since then, Broadcom’s market capitalization has soared to nearly $820 billion, largely due to the strength of Broadcom’s AI chip sales business, with Fortune predicting that its market cap will rise from $12.1 billion this year to next year. is expected to reach $16.9 billion.
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Broadcom stock was trading around $88 in mid-October of last year, but has soared to $175.98 and has a dividend yield of 1.16%. In contrast, Tesla (Nasdaq: TSLA)’s current market cap has fallen to about $699 billion, further below Broadcom’s spot on the Magnificent Seven. Does that mean we should load up on Broadcom and dump Tesla?
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The answer to that question depends on many different variables, but primarily your investment goals and strategy. Owning Magnificent Seven stock can be lucrative, but it does not guarantee wealth or performance. Additionally, membership in the Magnificent Seven is not permanent. Elon Musk always tends to develop innovations that will make Tesla’s market cap over $1 trillion.
There’s also always the chance that a company no one expected, like Broadcom, will catch fire and add yet another member to the Magnificent Seven. Investing in Magnificent Seven stocks can certainly be a winning strategy, but so can thinking outside the box and looking for companies to become new members. An even smarter move may be to diversify your portfolio by buying stocks of Mag Seven members and potential new entrants.
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This article This hot tech stock knocks Tesla out of the S&P 500 Magnificent Seven. Should you buy it? originally appeared on Benzinga.com
