Strength Seen In Small-Cap Equities

2025-12-15 12:43:00 ET

Much of the discussion over the last few years has centered around the Magnificent 7 stocks and artificial intelligence ((AI)). With this amount of attention, investors in the Mag 7 stocks have been rewarded with strong performance. This performance has pushed the valuation for some of the Mag 7 stocks to elevated levels. Broadcom ( AVGO ) trades at 75 times trailing earnings; however, with the strong projected earnings growth, the forward P/E is 36x. Knowing valuation alone is not a good market timing variable; subsequent to Broadcom's strong earnings report on Friday, the stock closed down over -11%. The trigger for this decline was the company discussing lower margins going forward due to increased demand for its ASIC business. Nonetheless, the market used the weaker margin narrative to sell the stock....

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