MAGS ETF: Magnificent 7 Outflows Surge as Investors Rotate Into DRAM

US investors are increasingly skeptical about the Magnificent 7, with most of these stocks still trading well below their all-time highs despite the S&P 500 and Nasdaq 100 nearing record highs. The Roundhill Magnificent Seven ETF (CBOE: MAGS) has plunged by 13.47% from the year-to-date high, and its outflows are rising.

Top Magnificent 7 ETF is Shedding Assets This Year

Data compiled by ETFDB shows that investors have continued dumping the MAGS ETF. Outflows have jumped to over $607 million in the last six months, with its assets under management dropping to $3.6 billion. 

MAGS ETF inflows and outflows | Source: ETFDB

The ongoing performance is primarily because most Magnificent 7 companies have retreated in the past few months. Alphabet (NASDAQ:GOOG) stock dropped by 17.5% from its highest point this year. 

Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA), Microsoft (NASDAQ:MSFT), and Meta Platforms (NASDAQ:META) have all dropped by over 10% from their year-to-date highs. 

Microsoft has been the worst-affected as it dropped by over 33% from its highest point this year, amid the growing concerns about its capital expenditure. It plans to spend over $190 billion this year, up by $25 billion from the previous estimate because of the rising memory, GPU, and server costs. 

Meta Platforms, Amazon, and Google also plan to spend over $535 billion this year. In addition to the lack of clarity on the future returns on investment, there are concerns about financing. Google recently raised $84 billion through a combination of convertible bonds and at-the-market offerings.

According to the FT, Meta Platforms also plans to raise a similar amount this year, while Nvidia has already raised $25 billion through a corporate bond. 

Other Magnificent 7 companies are facing more risks. Apple stock retreated this week after the company announced that it was raising prices of its MacBooks and iPhones, blaming the ongoing memory prices. These price increases have led to fears of demand destruction.’

Tesla, on the other hand, is facing challenges of the rising competition from companies like Nio, XPeng, and BYD. Its costs are also soaring as it builds the Terafab project in Texas. In its recent results, the management said that it will make a negative free cash flow this year.

DRAM ETF is Booming as MAGS ETF Struggles

With the Magnificent 7 stocks falling, investors have turned to memory names. The Roundhill Memory ETF (CBOE: DRAM) has gained over $24 billion since its launch in April this year. 

This fund has gained asset, helped by the ongoing demand for memory chips. Just this week, Micron (NASDAQ:MU) stock jumped to a record high after releasing robust earnings. Its revenue jumped by over 300% in the last quarter to over $41.5 billion. It predicts that this quarter’s revenue will be over $50 billion.

Other top memory stocks have been the best performers this year. SK Hynix and Samsung stocks have more than doubled this year, while companies like Sandisk, Western Digital, and Seagate are the top gainers in the S&P 500 Index.

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