The Magnificent Seven + AI stocks continue to gain momentum

1. New capital flows: European funds move to the U.S. stock market

Currently, Europe faces economic "stagnation" while the UK grapples with "stagnation + inflation." Following Canada's 25bp rate cut, Europe also cut rates by 25bp. Yet, European stocks broadly declined—the UK's FTSE 100, France's CAC40, Germany's DAX, Italy's MIB, Russia's MOEX, and the Eurozone's STOXX50 all fell.

Isn't rate-cutting usually bullish for stocks?

First, rate cuts affect the denominator of valuations (discount rates). But it depends on whether analysts use domestic long-term bonds or the 10-year U.S. Treasury as the discount rate. Generally, smaller, economically weaker nations with high capital mobility adopt the 10-year U.S. Treasury rate. Thus, Europe's 25bp cut doesn’t boost its stock valuations.

Second, Europe's economy is stagnant. Take Germany, its strongest player: PMI lingers near the boom-bust line (German ETF, Europe’s "strongest" broad-based index). Valuation numerators hinge on corporate earnings, but in a weak macro environment, profits suffer.
 

Hence, European stocks can’t rally further. So why the broad decline? Capital is flowing to the U.S.

In markets, strength begets strength. The "Magnificent Seven" have earnings momentum, and with NVIDIA leading the AI wave, most stocks keep rising. Capital chases returns—naturally, it floods into U.S. markets, keeping the Magnificent Seven resilient.

Alternatively, you could say: the later the Fed cuts, the more capital from early-cutting nations flees to the U.S. Of course, in capitalist countries, patriotism is thin—"all hustle for profit, all bustle for gain" fits these "maritime civilizations" (or, let’s face it, pirate legacies). European officials, lured by U.S. perks, cut early while America delays, widening rate differentials that drive capital stateside. This might all be prearranged.

Naturally, this differs from the Eastern power, which has "capital controls" (e.g., a $50K annual per-person quota). In war, great-power rivalry means guns and carriers; in peace, it’s economic—especially curbing capital flight. Keeping money home benefits the domestic economy.

Bottom line: capital flowing from Europe to the U.S. explains part of why U.S. stocks stay strong.

2. Heavyweight stocks: The Magnificent Seven + AI plays keep delivering

NVDA: NVIDIA. Hopes for its Dow 30 inclusion by Friday’s close were dashed. Next up: the June 26 shareholder meeting, where Jensen Huang’s (NVIDIA’s earnings "bet" paid off, "feasting" big.) trademark fiery speech should buoy the stock. Long-term, NVIDIA may follow Cisco’s CSCO path—hardware plays are cyclical, and collapse is inevitable. Just not yet.

Thus, software firms like Apple AAPL and Microsoft MSFT will outlast, likely as AI’s ultimate winners. Apple surged last week; Google GOOG, undervalued among the Seven, has room to catch up. Meta META will report earnings July 25, possibly announcing a "1-for-3 or 4" split.

AVGO: Broadcom’s July 15 "1-for-10" split (Broadcom (AVGO) Q2 earnings beat, AI strategy unfolds) mirrors NVIDIA’s path, with big institutional buys. This trend suggests further upside. Broadcom could replace Tesla as the new "Seventh." I’ve allocated AVGO in my high-vol account and SMH (an AI basket: 24% NVDA + 13% TSM + 7% AVGO + 5% QCOM + 5% ASML + 5% TXN + 4% MU + 4% AMAT + 4% LRCX + 4% ADI) in my low-vol one.

QCOM: Twitter buzz: Qualcomm’s next-gen Snapdragon chips will cost 20% more. Its mobile-chip dominance is irreplaceable—bullish ahead.

ADBE: Fundamentals confirm a reversal (Adobe Q2 beats, can "AI + creative software" rival Sora?). Sora spooked Q1 bears, but outperformance and raised guidance position Adobe as an "AI synthesizer"—huge upside potential.

PDD: Pinduoduo’s Temu grows fast, but customs policies loom as a wildcard in e-commerce’s next battle (PDD: Market cap tops Alibaba, crowned China’s "stock king").

Others: AMD needs fundamental and technical improvements. MU’s memory-chip price hikes drove a breakout. ASML’s EUV lithography monopoly shows technical momentum. INTC lags in AI—hardware is winner-take-all, so it’ll need the next wave to rebound.