ETF Action co-founder Mike Akins recommended this week on CNBC's ETF Edge that investors boost exposure to market sectors that underperformed compared with major artificial intelligence stocks over the next six months. Akins highlighted software and cloud computing names that have fallen from high valuations but maintain strong growth scenarios, disruptive technology playing into mid and small-cap ranges, underperforming Magnificent Seven index components, and small to mid-cap companies. The recommendations come as the Magnificent Seven index fell more than 2% in the first half while the Nasdaq-100 gained nearly 20%, though momentum shifted in early second-half trading with the Magnificent Seven up 5% and Nasdaq-100 down 1% as of Friday's close. Akins, who served as head of exchange-traded funds at ALPS before co-launching his independent financial tech and research firm, noted these sectors were left behind in a mega-cap and semiconductor-led market.
Akins Recommends Software and Cloud Computing Names
Akins told ETF Edge this week that software and cloud computing names top his list of underperforming areas with potential for strong returns. "These companies prove that 'yes,' we still do need software to do our day-to-day jobs," Akins said. He noted many of these names have fallen from "nosebleed valuations" and have "very strong growth scenarios."
Disruptive Technology Identified as Strong Buy
Akins flagged disruptive technology as a strong buy for the next six months. "It's a thematic strategy," Akins noted. "It kind of plays a little bit further down market into the mid [and] small-cap range. Those names have been kind of left behind in this mega-cap, semiconductor-led market." He added that "those could do quite well when you look through to their earnings growth estimates by the analysts. It's just a pretty rosy set up."
Magnificent Seven Index Positioned as Catch-Up Trade
Akins highlighted opportunities among the underperforming Magnificent Seven index, which comprises Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple and Tesla. "Who [would have] thought that Mag 7 was going to be flat year-to-date at the halfway market," said Akins, who considers the group a sound catch-up trade for the year's second half. The Magnificent Seven underperformed the Nasdaq-100 in the first half of the year, falling more than 2% while the Nasdaq-100 gained nearly 20%. In the early trading days of the year's second half, the Magnificent Seven index is up 5% while the Nasdaq-100 is 1% lower as of Friday's close.
Small and Mid-Cap Companies Highlighted for Outlook Through 2027
Akins expects small and mid-cap companies to be favorable spots going into 2027, noting how small-caps in particular have performed well this year. "All of the down-market names are really starting to catch up," he said. "I think you could see that continuing throughout the year --- not just from growing earnings [and] growing revenue, but also from an expansion of multiples that [have been] extremely depressed over the last several years." So far this year, the Russell 2000 index, which tracks small-cap stocks, is up almost 20% while the broader S&P 500 is up almost 11%.
FAQ
What sectors did Mike Akins recommend for the next six months?
Mike Akins recommended software and cloud computing names, disruptive technology, underperforming Magnificent Seven index components, and small to mid-cap companies as investment opportunities for the next six months.
How did the Magnificent Seven index perform in the first half compared to the Nasdaq-100?
The Magnificent Seven index fell more than 2% in the first half of the year while the Nasdaq-100 gained nearly 20%. In early second-half trading, the Magnificent Seven index reversed course, gaining 5% while the Nasdaq-100 declined 1% as of Friday's close.
What is Mike Akins' outlook for small-cap stocks?
Akins expects small and mid-cap companies to be favorable investment spots going into 2027. He noted the Russell 2000 index is up almost 20% this year and stated that "all of the down-market names are really starting to catch up" with potential for continued performance from growing earnings, revenue, and expansion of multiples that have been extremely depressed over the last several years.
