David vs. Goliath: 3 Stocks Poised to Challenge the ‘Magnificent 7′
The so-called “Magnificent 7” stocks surged in 2023, contributing to a market rebound in an outsized manner. The stocks’ presumed overrepresentation has investors considering other investments in their place. While tech has been the clear winner thus far in 2023, there’s plenty of reason to assume that other sectors will be strong moving forward.
That said, there’s definitely a tech stock or two to consider that could legitimately challenge the Magnificent 7 and their dominance. While it remains unlikely the group will be unseated in terms of market capitalization, that’s a great place to look for challengers. In fact, two of the three firms discussed are in the top 15 firms by market cap. Let’s take a deeper look at them and what they offer.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is truly in a position as David to Nvidia’s Goliath. The latter has opened up a massive lead in most things related to AI chips. It has been quite a run for Nvidia whose $13.5 billion in Q2 revenues far exceeded the $11 billion it had given as guidance. That has propelled Nvidia above $1 trillion in valuation. As impressive as it has been, it has unearthed an important question: Who’s next?
AMD is the clear answer. It is the main competitor to Nvidia in regard to AI chips. In fact, the company is realistically the only viable contender. It has been known for several weeks that AMD intends to debut a new suite of AI chips in Q4.
All investors have to do is establish a position now and be patient. AMD shares have held steady around the $100 to $110 range since June. It looks like investor demand will continue to hold steady in anticipation of the Q4 debut.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) is certainly in a position to challenge the Magnificent 7 stocks on multiple fronts. LLY is a highly-valued pharmaceutical stock, although the company itself remains far behind ones like Meta Platforms (NASDAQ:META). Though not a tech company, I believe Eli Lilly can challenge the Magnificent 7 for investment demand moving forward.
It’s all about Mounjaro, the breakthrough diabetes treatment showing massive potential for weight loss. Eli Lilly is currently seeking FDA designation for Mounjaro for that purpose. That will only open a path to greater revenues for the drug which saw massive sales approaching $1 billion in Q2 as a diabetes treatment.
Part of the reason that Mounjaro has been so incredibly well received is that it works better than rivals Ozempic and Wegovy for weight loss. LLY shares rocketed upward when the news of strong Q2 sales was released. Expect it to move higher again once FDA approval happens. It seems to be a case of when and not if at this point.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is one of the largest U.S.-traded energy stocks and I fully expect it to do well in the coming weeks and months.
Prices at the pump are rising again. Tentative signs suggest that demand continues to rise while supplies fall following Labor Day weekend. That is traditionally a time when prices slip as the summer season ends and driving levels decline.
Even though 2023 saw oil prices decline relative to 2022 levels, Exxon Mobil hasn’t missed a beat. The company recorded nearly $8 billion of earnings in Q2 and rewarded its shareholders nicely. It will reward them nicely in the near term through dividend income whether gas and oil prices continue to move upward. However, it looks like both will rise in the near term and that should send XOM shares upward. Thus, there’s a chance to catch it on the upswing right now and capture share price appreciation and dividend income.
On the date of publication, Alex Sirois did not hold (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.
