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“The Magnificent Seven” has certainly proven to be quite an amazing thing over the last few years. These companies include Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), and Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ:TSLA). In fact, the top seven stocks in the S&P 500 by market capitalization have largely maintained the index, accounting for about 30% of the total index.
The S&P 500 looked very strong, but it was really these absolutely huge companies that were affected. Therefore, many investors have some concerns. So let's take a look at what those concerns were and why you should consider another TSX tech stock instead.
storm of worry
With heavy investments in these seven companies driving the S&P 500 index higher and higher, there was concern that if these companies went down, the market could crash. That didn't exactly happen, but the market proved the hypothesis.
The Magnificent Seven reported earnings near the beginning of 2024, and each did very well overall. This led to a sharp rise in the S&P 500 index, and stock prices continued to rise steadily from January until the end of March.
However, once earnings began to be brought forward again and interest rates were still not falling, investors began to worry that the good times would not continue. This led to a decline in the S&P 500 index, and investments in large companies such as Nvidia stock saw their stock prices drop significantly.
Consider the sector
This is why the S&P 500, which has historically been considered safe, is not so safe these days. Until I have more exposure to other companies and market areas, I would consider diversification instead. And that should mean focusing on strong sectors that are likely to continue rising.
One area is the semiconductor market. As mentioned earlier, NVIDIA stock's share price has risen not only because the company has proven its worth with current earnings, but also on expectations for more in the future.
However, Nvidia stock is currently very expensive. With that in mind, I would instead focus on companies involved in semiconductor processing. And Celestica (TSX:CLS) is probably his best option on the TSX today.
Why choose Celestica as a stock?
There are many reasons to consider Celestica stock on the TSX today, especially if you're looking to invest in semiconductor stocks. Celestica Inc. operates in the semiconductor industry as a provider of manufacturing services and solutions for original equipment manufacturers (OEMs). An investment in Celestica can provide diversification within the semiconductor sector as it provides exposure to semiconductor-related activities beyond semiconductor manufacturing itself.
Additionally, Celestica offers a wide range of supply chain services including design, engineering, manufacturing, and aftermarket services. This diversification of services can help reduce some of the risks associated with pure-play semiconductor companies, which are more exposed to fluctuations in chip demand and prices.
The company has also proven its worth, with its stock price up 303% in the last year alone. However, at the time of writing, the stock is below its 52-week high. Therefore, today is a great time for investors to consider buying Celestica stock on the TSX. Especially if you want to escape the overexposure of Magnificent Seven stocks.
