CEO of Norway's Sovereign Wealth Fund Advises Investors to Dump Tech Stocks
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Loading... - Abel Mabbot
- 03 Feb 2025
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Nicolai Tangen, the CEO of Norway's sovereign wealth fund, which boasts nearly $2 trillion in assets, has recently stirred the investment community with his surprising advice: investors should consider dumping tech stocks. This recommendation comes despite the fund's substantial holdings in major technology companies, collectively known as the Magnificent Seven, which includes giants like Google, Meta Platforms, Amazon, and Nvidia.
Tangen's comments were made during the World Economic Forum in Davos, Switzerland, a gathering of some of the world's wealthiest individuals and influential investors. Speaking to Bloomberg, he suggested that investors should "do the opposite of everybody else," which, in his view, means selling U.S. tech stocks and instead investing in sectors that are currently out of fashion, such as Chinese markets.
This advice is particularly intriguing given that the Magnificent Seven stocks have been instrumental in driving a significant stock market boom in 2024. Tangen's fund, Norges Bank Investment Management, has heavily invested in these tech stocks, with its six largest investments being part of this group, alongside a notable $5.6 billion stake in Tesla.
While Tangen's advice may seem contradictory to the successful strategy that has benefited the fund, it reflects a cautious approach to the current market dynamics. Despite the impressive growth of the tech sector—Norges Bank's semi-annual report last summer highlighted a nearly 28% increase in its tech portfolio—Tangen is wary of the potential for a market correction.
He emphasizes the interconnectedness of the Magnificent Seven companies, all of which are heavily involved in the race to advance artificial intelligence (AI). This interdependence ties their fortunes to the performance of chip and semiconductor manufacturers like Nvidia, Taiwan Semiconductor Manufacturing, and Advanced Micro Devices. While this synergy has driven up their valuations, it also creates a concentration risk that could have dire consequences in the event of a downturn.
Tangen's concerns are underscored by the fact that the Magnificent Seven accounts for nearly 33% of the total value of the S&P 500. The profits generated by these companies have contributed to 75% of the S&P 500's earnings growth in 2024. This heavy reliance on a small number of companies raises alarms about the potential for significant losses during a market correction.
In an interview with the Financial Times Unhedged podcast, Tangen articulated his worries about this concentration, stating, "The concentration is absolutely worrying. It means that there is a risk in the stock market which we have never seen before." He highlighted that as these companies grow larger and more influential, the risks associated with their dominance in the market also increase.
Nicolai Tangen's advice to consider selling tech stocks serves as a cautionary reminder of the inherent risks in a market heavily reliant on a few dominant players. While the tech sector has been a significant driver of growth, the potential for a market correction looms large, prompting investors to reassess their strategies. Tangen's insights reflect a prudent approach to investing, advocating for diversification and vigilance in an ever-evolving financial landscape. As the market continues to fluctuate, investors would do well to heed his warnings and consider the broader implications of concentration risk in their portfolios.
