CNBC Television
Very unusual to have such high concentration in equities, says Apollo Global's Torsten Slok
11/5/2025, 7:47:05 PM
Economic Summary
- Since the beginning of the year, earnings expectations and profit-margin revisions have diverged: the Magnificent Seven have seen upward revisions while the S&P 493 have experienced downward revisions, concentrating headline gains in a handful of stocks.
- The Magnificent Seven now account for roughly 40% of the S&P 500 market cap, meaning broad-index investors are effectively heavily exposed to a few names and may not be diversified; this concentration has implications for portfolio risk and market breadth.
- Valuation and event risks (including reported put buying by Michael Burry, possible short interest from Deutsche Bank, tariff concerns, and the risk of a government shutdown) could magnify downside for richly valued AI and mega-cap names such as NVDA, PLTR, and TSLA.
Bullish
- Earnings expectations have risen for the Magnificent Seven, supporting continued outperformance.
- Ongoing expansion of the AI theme can keep demand and valuations elevated for leaders like NVDA.
Bearish
- Magnificent Seven concentration (~40% of S&P 500 market cap) creates significant diversification and systemic risk.
- Earnings and profit margins for the S&P 493 are falling, signaling broader corporate weakness outside the MAG7.
- Sky-high valuations (e.g., TSLA trailing P/E >300) increase the probability of sharp downside if sentiment shifts.
- Near-term catalysts—tariff risk, potential government shutdown, and hedge/short activity—could pressure AI-related stocks.
Bullish tickers
NVDATSLA
Bearish tickers
NVDAPLTRTSLA
NVDA
Bullish
Beneficiary of rising earnings expectations for the Magnificent Seven and the expanding AI thematic demand.
Bearish
Seen as a potential target for puts/hedges (Michael Burry reported buying puts) and possible short interest; valuation support required to avoid downside.
PLTR
Bullish
Could benefit from continued AI theme expansion, though transcript emphasized hedging activity rather than fundamentals.
Bearish
Named alongside reported put activity and discussed as a possible target for bets against AI-related names.
TSLA
Bullish
Part of the concentrated Magnificent Seven group with upward earnings revisions supporting its market leadership.
Bearish
Highlighted for extremely high trailing P/E (noted >300), implying elevated valuation risk if momentum falters.
People mentioned
Torsten SlockBrianMichael Burry