From FANG, MAGMA, MAG7, in the past nearly ten years, U.S. stock investors always seem to like to give "resounding nicknames" to those large-cap technology stocks that have led the market. Now with the sudden rise of Broadcom this month, the U.S. stock market seems to have a new slogan: BATMMAAN!
The eight stocks covered by BATMMAAN, in alphabetical order, are: Broadcom, Apple, Tesla, Microsoft, Meta, Amazon, Alphabet and Nvidia.
Obviously, investors who are familiar with the specific list of the "Big Seven" (MAG7) know that BATMMAAN simply adds Broadcom to the Big Seven.
Although many Chinese investors may easily think of BAT (Baidu, Alibaba, Tencent) when they see the first three letters of BATMMAAN, there is no doubt that the two are not related. The reason why the above eight companies are arranged in this order actually corresponds to the letter arrangement variant of Batman (BATMAN).
In fact, when Tesla performed poorly last year, there were calls on Wall Street whether Tesla should be removed and another stock should be selected to join the ranks of giants. This year, with the outstanding performance of Tesla's stock price, Broadcom has achieved amazing year-end market prices. Rather than continuing to maintain the "personality" of the "Big Seven", a more reasonable approach is indeed to change it to the "Big Eight".
From the perspective of scale, Broadcom now indeed has the confidence to "eat at the same table" with the above-mentioned giants.
The market value of Broadcom, the artificial intelligence chip manufacturer, currently reaches US$1.13 trillion, ranking just behind Tesla among US listed companies. The company's stock price has been rising since it announced its results earlier this month. Broadcom's annual results show that in fiscal year 2024, annual revenue reached US$51.6 billion, a year-on-year increase of 44%, with AI and VMware business segments becoming the core growth engines. This prospect pushed the company's stock price to its largest single-day percentage gain ever on the day after the earnings report was released, soaring 24% in a single day.
Many are calling this Broadcom's "Nvidia moment" - a reference to Nvidia's stunning performance since 2023 that has investors piling into the stock. Currently, almost all cloud service providers’ self-developed chips require Broadcom’s ASIC chip services. According to public information disclosed by Broadcom, Google and Meta are the company’s largest customers for ASIC custom chips. In addition, there is news that Apple is also developing a server chip specially designed for AI, and is working with Broadcom to develop the network technology of the chip, which is expected to be mass-produced by 2026.
Hedge funds appear to be buying Broadcom stock in a big way, according to YourWeekendReading's monthly holdings analysis. Analysis shows that as of December 16, the chipmaker ranked only eighth among the largest holdings of 338 hedge funds, and it did not even enter the list earlier this year, which will undoubtedly give industry institutions room to increase their holdings.
Are large-cap technology stocks continuing to become the mainstay of U.S. stocks?
Overall, while the concept of BATMMAAN emerged in the U.S. stock market, large-cap technology stocks still seem to play the role of "mainstay".
Data from Dow Jones Markets shows that despite some turmoil in the stock market on Friday, the combined market value of these eight companies has increased by more than $1.9 trillion since the election. This is equivalent to more than 85% of the increase in the total market value of the S&P 500 Index during the same period.
Initially, Trump's victory pushed U.S. stocks higher across the board after the election, with value stocks such as financials and small-cap stocks rising alongside large-cap stocks such as BATMMAAN. But since early December, financial and other stocks that initially rose after Trump's victory have begun to narrow their gains.
As we enter the last two trading days of this year, the performance of various U.S. stock sectors in December is actually very similar to that in 2023. As of Friday, only three of the 11 S&P 500 sectors were up this month: Information Technology, Consumer Discretionary and Communications Services, and the eight "BATMMAAN" stocks all fall into one of those three sectors.
FactSet data shows that although the S&P 500 index may record a decline this month, the Nasdaq Composite Index, which is more affected by large technology stocks, was still up about 2.5% as of Friday's close. The Dow Jones Industrial Average also struggled this month, setting a record for its longest losing streak since the mid-1970s.
George Cipolloni, portfolio manager of Penn Mutual Asset Management, said in an interview on Friday, "At the beginning after the election, the U.S. market had a good upward range expansion momentum. Many stocks performed well in those weeks, but slowly returned to a highly concentrated market pattern."
Apollo's Torsten Slok said the proportion of stocks in the S&P 500 with a combined weight of at least 3% has recently reached its highest level since at least the early 1990s. The five most heavily weighted stocks are: Apple (7.2%), Nvidia (6.3%), Microsoft (6%), Alphabet (4.4%) and Amazon (4.4%).
In this regard, Cipolloni believes that investor enthusiasm for earnings growth may be tempered by rising U.S. Treasury yields, which exacerbated the overall market weakness in December. At the very least, rising borrowing costs may distract investors from investing more funds in individual stocks other than mega-cap stocks, which are considered to be best able to withstand rising interest rates due to their abundant cash flow.
So far, investors have also been willing to drive up BATMMAAN's stock price based on its huge investments in artificial intelligence infrastructure, although the return on many investments is unclear.
Burns McKinney, portfolio manager at NFJ Investment Group, predicts that next year investors may start demanding more conclusive evidence that these investments will deliver returns.
“We’ve been letting some of these AI darlings go on credit for a while, and that’s what I mean when I say they need to ‘show me (the results),’ and if they fail to do that, investors may turn to value stocks and other areas of the market where valuations are more attractive,” he said in an interview.