Investor focus is turning toward several large-cap technology names as institutional investors continue to crowd into the “Magnificent Seven” complex. According to a Hazeltree Crowding Report tracking long positions held by institutions, six of the seven members of the group (excluding Tesla) were among the top 10 most popular long positions in May, with Nvidia, Microsoft, and Meta highlighted by the report as particularly compelling on valuation.
All three companies are trading at comparatively low forward valuation metrics relative to their expected earnings trajectories, according to the figures cited in the report and related earnings outlooks. Investors are weighing that discount against catalysts including stronger-than-feared earnings, ongoing AI-related demand, and revised spending plans.
Key takeaways
- Price move: The article cited that Microsoft shares are down 21% year to date, while Meta is down 13% year to date and has recently fallen further on company-specific news; Nvidia’s valuation is described as having eased from last year despite strong fundamentals.
- Catalyst: Recent results and forward guidance pointed to accelerating AI-linked revenue trends for Microsoft and continued earnings momentum for Nvidia, while Meta faced headline-driven uncertainty around AI spending and executive changes.
- Key implication: The central investment argument is that investors may be underpricing near- to medium-term earnings growth in Nvidia, Microsoft, and Meta—despite different sets of near-term risks.
Why Nvidia, Microsoft and Meta are getting attention
According to the Hazeltree Crowding Report, institutional investors have remained heavily engaged with the Magnificent Seven, with Nvidia, Microsoft, and Meta standing out within the group’s most popular holdings. The report’s emphasis is on positioning—where money is going—paired with the valuation lens that these names appear cheaper than where their earnings growth would suggest they “should” trade.
In particular, the article argues that each stock is trading at a significant discount based on forward earnings multiples and growth-sensitive valuation measures, while their latest quarters and forward estimates provide a narrative of continued earnings power tied to enterprise cloud services and AI infrastructure.
Nvidia’s earnings momentum versus a lower valuation
The article said Nvidia is trading at 23 times forward earnings, down from 40 at this time a year ago. It also cited a five-year price-to-earnings-to-growth (PEG) ratio of 0.63, arguing that a PEG below 1 typically implies the stock is undervalued relative to longer-term earnings expectations.
On fundamentals, the piece pointed to strong operating momentum: it cited that in the latest quarter, revenue rose 20% sequentially and 85% year over year, while earnings climbed 214% year over year. For the current quarter, Nvidia is described as forecasting revenue of $91 billion, an 11% increase over the prior quarter, and gross margin of 74.9%, slightly below the prior quarter’s 75%.
Looking ahead, analysts referenced in the article expect 88% earnings growth for Nvidia in the current fiscal year to $8.96 per share, with 42% earnings growth expected for the next fiscal year. The article also cited a median price target of $300 per share for Nvidia, implying a 44% return over 12 months based on that target.
Microsoft’s valuation reset and AI cloud traction
Microsoft has had a weaker stock performance, with the article noting shares are down 21% year to date. It attributed the decline to a mix of factors, including concerns tied to AI spending, questions about partner OpenAI’s profitability, worries about overspending, and reports suggesting slightly slowing AI cloud growth.
However, the article argued that more recent results helped address some near-term concerns. It said Microsoft delivered “blowout” earnings that topped estimates, while cloud revenue grew 29% year over year and Azure AI cloud sales rose 40%. It also said Microsoft restructured its OpenAI arrangement so it is no longer an exclusive provider and no longer pays revenue share to OpenAI.
For forward expectations, the article cited guidance calling for double-digit revenue growth in the current fiscal year, with 5% sequential sales growth expected in the current quarter. It also cited forecasts for Azure sales to rise 40% year over year in the current quarter and accelerate in the second half of calendar year 2026.
The valuation, according to the piece, is the main swing factor: it said Microsoft trades around 19 times forward earnings, near the lowest level in the last 10 years. The investment thesis presented is that the combination of AI-driven cloud demand and a lower valuation could make the stock a more attractive entry point than its recent drawdown suggests.
Meta’s low multiple amid spending uncertainty
The article said Meta’s shares have been pressured by multiple developments tied to its AI push. It referenced a Financial Times report that Meta was raising money for AI spending, which company officials characterized as “pure speculation.” It also cited a separate decline of about 5% following news that a top executive responsible for AI implementation was leaving the company.
Despite the negative headlines, the article positioned Meta’s valuation as a key reason investors may be looking past the volatility. It said Meta is trading at 18 times forward earnings with a PEG ratio of 0.82. It also cited that, in the latest earnings report, Meta grew revenue 33% and earnings 62%, while expecting 7% sequential revenue growth in the current quarter.
Spending remains the central variable. The article said Meta guided for a 41% increase in spending to about $165.5 billion at the midpoint of its fiscal-year spending range and raised its capital expenditures guidance to $125 billion to $145 billion, up from $115 billion to $135 billion, to fund AI data centers.
Still, the article argued the market is pricing in too much risk relative to earnings power. It cited a median price target of $808 per share, implying 43% upside at the time of writing.
What investors should watch next
For Nvidia, Microsoft, and Meta, the next set of catalysts likely centers on whether earnings growth and AI-related revenue trends can stay ahead of expectations while spending plans remain manageable. Investors will also be watching for follow-through in cloud and AI infrastructure demand and for additional company-specific developments that can swing sentiment quickly—especially for Meta—alongside broader rate and inflation dynamics that influence how markets value long-duration growth.
