• A "long Magnificent Seven" position has been identified as the most crowded trade by global fund managers, overtaking long gold.
  • The trade's dominance raises concerns about concentrated risk in U.S. Big Tech amid recent volatility and AI investment scrutiny.
  • Nvidia's upcoming earnings are seen as a critical test for sector sentiment as the Roundhill Magnificent Seven ETF heads for its worst month since March.

Fund managers have declared betting on the continued rise of the largest U.S. technology stocks as the market's most crowded position, according to Bank of America's November global fund manager survey. A "long Magnificent Seven" trade—buying Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—was identified as the most crowded by 54% of respondents, displacing long gold from the top spot.

The recognition comes amid mounting concerns about concentration risk in these seven names, which have driven a disproportionate share of market returns this year. The Roundhill Magnificent Seven ETF is down nearly 4.7% this month, on track for its worst performance since March, as investors question whether the AI-driven rally has pushed valuations into unsustainable territory.

"When a trade becomes this consensus, it often signals that positioning is stretched," said one portfolio manager who participated in the survey but requested anonymity to discuss the findings. "The question now is what catalyst might cause the crowd to reverse course."

Recent performance within the group has been mixed, adding to the uncertainty. While Nvidia has delivered staggering returns of 1,588% over five years, Microsoft and Amazon have posted negative one-year returns as of recent data. The S&P 500 information-technology sector is on pace to snap a seven-month rally, largely driven by these seven stocks.

The concentration is particularly striking given these companies now represent an outsized share of S&P 500 earnings growth and capital spending. Some analysts have begun warning that the massive capital expenditures required for AI infrastructure could transform these former growth darlings into capital-intensive "utilities" with potentially lower future returns.

Bank of America's survey, which polls hundreds of fund managers globally, is closely watched as a sentiment indicator. The identification of the Magnificent Seven trade as crowded suggests professional investors are growing wary of the concentration risk, even as many remain heavily exposed to the names.

Next week's earnings report from Nvidia is seen as particularly critical for sector sentiment. The chipmaker's results have become a bellwether for the AI trade, and any disappointment could test the resilience of the crowded positioning.

Attempts to reach representatives from several of the Magnificent Seven companies for comment were unsuccessful Thursday afternoon. A spokesperson for Bank of America declined to elaborate beyond the published survey results.

*Correction: An earlier version of this article misstated the percentage of respondents identifying the trade as crowded. The correct figure is 54%.