Company Interview / SoftBank exits Nvidia, trims Mag 7 exposure

Key points:

AI narrative drives frothy valuations with stocks like Palantir ($PLTR) and Fermi under scrutinyReduced "Magnificent Seven" exposure, favouring diversification within AI ecosystemOverweight financials, with JP Morgan, Morgan Stanley, CaixaBank, and NatWest highlightedUnderweight healthcare but select positions in Intuitive Surgical, AstraZeneca, and Costco for defensiveness

Elfreda Jonker from Alphinity Investment Management highlights that the market this year has been heavily influenced by increased liquidity and strong participation from retail investors, rather than traditional fundamentals such as cash flow or balance sheets. Jonker notes that the current hype, especially around artificial intelligence, has driven some stocks to frothy valuation levels, with certain narratives seeming overdone. According to Jonker, companies like Palantir ($PLTR), which trades at a forward 160 PE, and newly listed IPOs like Fermi, are examples of stocks with significant speculation ahead of profits or revenues.

Jonker states exposure to the "Magnificent Seven" tech stocks has been reduced, maintaining holdings in Microsoft ($MSFT), Nvidia ($NVDA), and Amazon ($AMZN), but increasing investments in companies such as Broadcom ($AVGO), TSMC ($TSM), and Nol, focusing on other parts of the AI ecosystem. Financials remain a key overweight, with strong results reported across international banks. Jonker mentions favouring JP Morgan ($JPM), Morgan Stanley ($MS), CaixaBank (BME:CABK), and NatWest (LON:NWG) due to their robust performance and attractive valuations.

Healthcare exposure is currently underweight due to regulatory uncertainties, although select investments are maintained, including Intuitive Surgical ($ISRG) and AstraZeneca (LON:AZN). Jonker also notes a preference for defensive names among staples, such as Costco ($COST), to bolster portfolio stability.