These underperforming trades could yield big returns over next six months
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- Mike Akins, co-founder of ETF Action, told "ETF Edge" that software and cloud computing names have fallen from "nosebleed valuations" but carry "very strong growth scenarios," making them a buy for investors looking past AI leaders.
- Akins flagged disruptive technology as a strong thematic buy over the next six months, specifically targeting mid- and small-cap names "left behind" in the mega-cap, semiconductor-led market and pointing to analyst earnings growth estimates he called "a pretty rosy set up."
- The Magnificent Seven — Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple, and Tesla — was flat year-to-date at the midpoint while the Nasdaq-100 gained nearly 20%, and Akins views the group as a sound catch-up trade for the second half.
- The Magnificent Seven index is already up 5% in the first trading days of H2, while the Nasdaq-100 is 1% lower as of Friday's close, per the source — a reversal Akins says shows momentum has started to shift.
- The Russell 2000, which tracks small-caps, is up almost 20% this year versus nearly 11% for the S&P 500, and Akins expects small- and mid-caps to remain favorable into 2027 as depressed multiples expand.
- Akins, who previously ran ETFs at ALPS before launching his independent research firm, said "all of the down-market names are really starting to catch up" and that the rotation could continue on both earnings growth and multiple expansion.
Why it matters: Akins is betting that the narrow, AI-led rally that defined the first half — where the Nasdaq-100 returned nearly 20% while the Mag 7 was flat — has already begun to broaden, with the Mag 7 up 5% and the Nasdaq-100 down 1% in early H2 trading. Investors overweight mega-cap tech now face a reallocation decision: chase catch-up trades in software, cloud, and small-caps, or stay concentrated in the AI winners that led the first half.
