Nyland: MSFT & TSLA Top Mag 7 Stocks for Growth, AI CapEx Story "Healthy"

from Rothschild and Redburn this morning, although not moving higher because of that note, we're down about a half a percent with the overall market. I do want to welcome in our next guest though. Joining us this morning, Tim Nyland, CFA and co-chief investment officer at Synergy Asset Management. Tim, great to have you with us. Now, I'm looking at a mixed market as we're kicking off a new trading week here. We had an all time high in the S&P last week thanks to a blockbuster earnings season. But we still have a very interesting backdrop in that we don't have any resolution in the issues with Iran. We've got high geopolitical uncertainty still concerns about the AI trade. We got weaker than expected retail sales jobs data, milder inflation. How are you looking at the markets right now? Yeah, basically we started this consolidation process in June. And the way that we're looking at this market is that we're going to continue to be a little bit choppy. We're going to start to, you know, continue to experience some of the mixed data that we've had all the way through the midterms until we get ready for probably a pretty solid wrap up to the to the end of the year in Q4. So probably pretty choppy here for the next couple of weeks, if not month and a half or so that we have in conjunction with the earnings season. That's almost wrapped up. I say almost because Nvidia is still left out of the equation here. How are you looking at the Fed's path forward, and what has the data that we've gotten done to your outlook. Has it changed in any meaningful way or is it not enough data points to affect your base case? Yes. I mean, we have had enough data to basically put the fed on hold. I mean, that's kind of our viewpoint. We really need to see what the next batch of data looks like. But given the latest jobs numbers that have come out this month and given the latest retail sales number that came out, you know, our viewpoint is that that the fed can can basically remain on hold and be more data dependent, if you will. And what's your base case through the end of the year? Tim, are you still in wait and see mode much like the fed is here or are you anticipating a hike? Are you expecting a hold through year's end? Yeah, it's a great question. We are definitely in the camp of of, of being on hold through year end. We just we don't see a need for the fed to raise rates at this point. And you know, although we are bracing for the potential of a of a fed surprise, we still have fed Federal Reserve Board governors that that want to see rate hikes. But the way that we see things now, the fed can at least pause through continue to hold through September. All right. And then let's talk more broadly about this earnings season. That's essentially almost over. We've got some retailers coming our way this week. We're of course waiting on Nvidia. But we're about 90% of the way there at this point. We saw earnings growth run north of about 30%. I think it was a 31%. Last I checked. We've seen a significant broadening beyond the mag seven. In fact, as I'm looking at the mag seven right now on our big board, we're lower all but Nvidia today. How are you looking at that that broadening out here and the possibility that this rally continues through year end? Yes. I mean the broadening out that we've experienced year to date has been extremely healthy. We've got, like you mentioned, you know, 31% year over year growth in earnings for Q2. We're expecting that to rise to about 26% through year end. So if you look at the contribution of the Mag seven, only up about 9.3% so far year to date against the broader S&P. As of last Friday, roughly 14.3%. We could actually see some leadership come through the second half of the year for those mega cap names in the mag seven. So we're pretty optimistic for a for a pretty robust Q4. But we got to get through the midterm elections first. That's really our our next hurdle. And how are you looking at this AI trade CapEx debate as it's ongoing? I mean, we've got two point almost $2.5 trillion in terms of our four largest hyperscalers. How are you looking at that? Are you viewing that as being in line with your expectations? Is it under is it excessive? You know, we're looking at the way that those those that CapEx is being financed right now. I mean, a lot of it's taking place off balance sheets. We're keeping an eye on that. Overall. We obviously feel it's very healthy for the economy. If you look at the contribution of CapEx to GDP growth, it's obviously a significant portion of that. And so I mean, right now the the main takeaway is is that that CapEx is not decreasing. It's actually accelerating. And that is very healthy for the economy and healthy for tech stocks specifically, anybody related to, you know, semiconductors, hardware, that space. And Tim, how are you looking at the durability of demand right now? And as we look across these major hyperscalers with those astronomical numbers in terms of their spend, who do you feel is best positioned to actually see some return on their investments? I think that that that the mag seven in general, if you were to ask for some of my, you know, top picks, I mean, just look at the laggards in the space. You know, Tesla still lagging year to date. You know, you've got meta still lagging year to date. Microsoft has done fairly well as of recently. But really contribution from that entire group is, is, is very, very likely here through the end of Q4. And that's, that's, you know, really what we're looking for. And as we look broadly across the mag seven right now, Tim, who do you view as being the most underappreciated? You put some good candidates in that group there. Probably the most underappreciated just just from the perspective of, you know, being kind of taken down with the entire software sector, probably Microsoft, but I would have to put Tesla in that group as well. It's just the runway for Tesla is is simply enormous over the coming years. So those would be my my two picks. And before we have to say goodbye, I want to talk about the consumer because we do have the retailers still left this weekend to learn more about the consumer. But we did start to see some cracks. We got some weaker than expected retail sales. There were some one off items in there that may have affected July numbers, but how are you looking at the consumer right now? We also saw sentiment fall unexpectedly, which isn't a change. We've seen sentiment below and the consumer continued to spend. But Tim, are you expecting before year end to start to see more of those moving in line where we actually start to see some pullback in corporate earnings, because eventually that sentiment is going to start to show up, right? I mean, doesn't history show at some point. It has to then affect people's spending. Yeah. No I think I think we probably need to see some additional data at this point. When we lifted the hood on that number, you know, we were looking at the, the, the traditional non-store retailer like Amazon, you know, it was down, autos were down. So it was definitely broad based enough to be concerning. But then you looked at other categories, you know, bars, restaurants, that sort of thing was actually positive clothing. So I think we probably need to see some additional data to get a really good gauge as to the state of the consumer at this point. Tim, always great to talk to you. Really appreciate you taking time on your Monday morning to be