
On this week’s episode of ETF Prime, VettaFi Senior Research Analyst Zeno Mercer joined host Nate Geraci. They discussed the outlook for the “Magnificent Seven” this year and an overview of AI ETFs. Later, Greg King, founder and CEO of REX Financial and Osprey Funds, talked about the firm’s crypto filings and leveraged single-stock ETFs.
The Road Ahead for Magnificent Seven Stocks
The “Magnificent Seven” stocks (Meta, Apple, Microsoft, Alphabet, Amazon, Nvidia, and Tesla) outperformed significantly for much of 2024. Geraci noted that the Roundhill Magnificent Seven ETF (MAGS ) gained 67% from the beginning of 2024. Mercer delved into the details of last year’s performance before turning to this year’s outlook.
“If you break down the Mag seven’s trailing 12 months you have Nvidia, Tesla, and Meta leading the pack,” Mercer explained. Amazon’s performance put it in the middle of the pack, while Apple and Microsoft lagged the others.
The global regulatory environment will likely influence performance this year. Regulatory challenges in China are already being reflected in Apple’s stocks and performance. Meanwhile, a new administration in the U.S. could prove favorable for some stocks, though actual policy remains uncertain for now.
For Tesla and Nvidia specifically, new avenues of opportunity in robotics could prove advantageous this year and looking ahead. Mercer noted that while robotics is an established industry, AI presents a new opportunity set that includes cloud simulations and real-world deploying. It’s also an arena that China continues to grow its development in.
“Despite the optimism over some of these end markets — and the obvious growth we’re going to see there as these technologies start to see deployment and adoption — it’s competitive,” explained Mercer. Microsoft, Meta, and Amazon are all also currently in development for their own AI chips.
AI Investing Beyond Mag Seven
New AI developments, including a China company’s recent release of an open-source AI that rivals OpenAI’s latest public AI offering, underscore how dynamic and unpredictable the space remains.
It lends credence to Mercer’s belief that investors should begin looking beyond the biggest names to those underappreciated companies likely to benefit: “If you’re an investor or an individual — a human — you need to be thinking, ‘There’s a bunch of different scenarios that could play out. How do I capture opportunities that might succeed in at least multiple scenarios?’”
For those investors looking to capture artificial intelligence growth, a number of ETFs currently exist in the market. The ROBO Global Artificial Intelligence ETF (THNQ ) offers pure-play exposure to the category, as does the Roundhill Generative AI and Technology ETF (CHAT ). MAGS also captures the AI industry, but with a more satellite approach.
Mercer recommended funds like the Invesco S&P 500 Equal Weight ETF (RSP ) as a way to harness beneficiaries of broader AI-driven growth through alternative exposures. Funds like RSP reduce megacap concentrations for investors with notable portfolio overweight to the Magnificent Seven.
The two also discussed valuations, ongoing and new developments, potential regulation impacts on Mag Seven stocks, and AI ecosystem developments. They also touched on the launch of the Trump meme coin last week and bitcoin.
Single-Stock Leveraged ETFs
Greg King, founder and CEO of REX Financial and Osprey Funds, appeared next to chat about the firm’s single-stock leveraged ETFs. However, the pair kicked off their discussion with recent crypto ETFs filings from REX on a number of cryptocurrencies. The firm filed for seven crypto ETFs that included Solana, bitcoin, Ethereum, DOGE, and more.
“We’re excited about the direction of — as you were just saying with the previous guest — the confluence of crypto and capital markets,” King noted. The recent launch of the Trump meme coin caught many by surprise. However, from the perspective of REX, “It’s an amazing signal as to the friendliness of this administration to crypto.”
The two turned to discussion of the firm’s single-stock leveraged ETFs. The firm launched the T-Rex 2X Long MSTR Daily Target ETF (MSTU) in September 2024 and offers several other leveraged and inverse ETFs. MSTU already has over $2.2 billion in AUM, the largest in its category, and generated the highest total return in 2024 of all ETFs, at over 380%.
“Leveraged ETFs were first launched by ProShares in 2006,” explained King. Before that initial launch, he discussed how many in the industry doubted the demand for such a product versus access through a margin account. “There are pros and cons to both, and we believe that it’s OK to wrap things in slightly different packages for slightly different audiences.”
King sees a use case for such strategies across a range of investors, from retail to well-established hedge funds. The firm’s leveraged and inverse ETFs all carry heightened risk for investors, and are not meant to be bought and held; they’re meant to be short-term investments. The firm also offers income ETFs such as the REX Crypto Equity Premium Income ETF (CEPI).
Listen to the entire episode of ETF Prime, featuring Zeno Mercer & Greg King:
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