Forget the “Magnificent Seven”: 1 TSX Tech Stock to Buy Instead

The “Magnificent Seven” stocks are certainly impressive, but they’re also pricey. Which is why this tech stock is a far better option.

The ‘Magnificent Seven’ have certainly proven to be quite magnificent 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), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA). In fact, the seven largest stocks by market cap on the S&P 500 were pretty much holding up the index, taking up about 30% of the overall index.

So while it looked like the S&P 500 was doing really well, it really came down to these absolutely enormous companies. And that led many investors to have a few worries. So let’s get into what those worries were, and why there’s another TSX tech stock to consider instead.

Worry flurry

The fear was that with the S&P 500 running higher and higher due to the heavy investment in these seven companies, should the companies drop the market could crash. And while that didn’t exactly happen, there was proof of the hypothesis on the markets.

The ‘Magnificent Seven’ reported their earnings near the beginning of 2024, and each did quite well overall. This led to a surge in the S&P 500, with shares continuing to rise higher and higher between January and the end of March.

However, by the time earnings started to come forward once more, and there was still no drop in interest rates, investors began to fear the positivity would’t continue. This led to a drop in the S&P 500, with investments in major companies like Nvidia stock seeing a massive drop in share price.

Consider sectors

That’s why the historically safe S&P 500 hasn’t been all that safe recently. Until there is more exposure to other companies and areas of the market, I would instead consider diversifying. And that should mean looking at strong sectors that are due to continue rising.

One area is the market of semiconductors. As mentioned, shares of Nvidia stock rose higher as the company not only demonstrated its worth in current earnings, but expects even more in the future.

Yet shares of Nvidia stock are now quite expensive. With that in mind, I would instead look at companies that are involved in the semiconductor process. And Celestica (TSX:CLS) is perhaps the best option on the TSX today.

Why Celestica stock?

There are many reasons to consider Celestica stock on the TSX today, especially if you’re looking to invest in semiconductors stocks. Celestica stock operates in the semiconductor industry as a provider of manufacturing services and solutions for original equipment manufacturers (OEMs). Investing in Celestica can provide diversification within the semiconductor sector, as it offers exposure to semiconductor-related activities beyond semiconductor manufacturing itself.

Furthermore, Celestica offers a range of supply chain services, including design, engineering, manufacturing, and aftermarket services. This diversification of services can mitigate some of the risks associated with pure-play semiconductor companies that may be more exposed to fluctuations in chip demand or pricing.

The company has proven its worth as well, seeing shares surge by 303% in the last year alone! And yet as of writing, shares are below 52-week highs. Therefore, it’s a great time for investors to consider picking up Celestica stock on the TSX today. Especially if they want to get away from the over-exposure of the “Magnificent Seven” stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Amy Legate-Wolfe has positions in Microsoft. The Motley Fool recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

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