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Pro Picks: 3 Ways to Profit from Mag 7 Demise

WATCH THE FULL EPISODE: Very few people are willing to be bearish on the biggest tech companies in the world. And you’ll find almost no one who says they are an outright short. But in this episode of In the Money with Amber Kanwar, legendary Wall Street strategist Larry McDonald, founder of the Bear Traps Report and author of the new book How to Listen When Markets Speak, explains why the next big rotation is already underway from overvalued tech stocks to overlooked hard assets. 

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1. Short Nvidia (NVDA) – Via Leveraged Inverse ETF (e.g., NVDS or similar; use with caution due to decay)

McDonald sees Nvidia as overvalued and vulnerable to energy constraints and competition, recommending a short position to hedge or profit from potential downside.

  • Thesis: Nvidia trades at 28x sales (vs. peers at 8-14x), with growth assumptions reliant on flawless execution amid cracking competitive moats and AI energy bottlenecks; past drawdowns of 65-70% in 2018 and 2022 highlight volatility.
  • Upside Potential: A 30-70% drawdown in Nvidia could yield amplified returns (e.g., 1.5-2x leverage on downside), especially if energy shortages delay data centers and crush earnings.
  • Risk Note: Leveraged ETFs have embedded decay; best paired as a hedge against long energy positions for institutional investors.

2. Long Natural Gas – Via Equities (e.g., Range Resources (RRC), EQT Corp (EQT)) or ETF (FCG)

Natural gas is positioned as a bridge fuel for AI’s power needs, with recent price corrections creating entry points in strong-balance-sheet producers.

  • Thesis: Natural gas demand surges from AI data centers (hyperscalers like Meta transitioning to on-site nat gas); sector saw a “hot money flush” with equities down 33-35% from spring highs, now at 2-4x EBITDA with 10-15% free cash flow yields for buybacks and debt reduction.
  • Upside Potential: AI-driven demand could double or triple prices; FCG ETF (basket of producers and pipelines) valued at a fraction of Nvidia’s market cap, offering 50-100%+ upside over 2-3 years as infrastructure ramps up.
  • Upside Potential: Strongest balance sheets in years and path to “green meadow” (renewables) via nat gas position it to outperform tech, with potential for 80%+ gains like recent hard asset rallies.

3. Long Coal – Via Equities (e.g., Core Natural Resources) or ETF (COAL)

Despite being a “dying” fuel, coal gets a revival from explosive AI power demand and post-election corrections.

  • Thesis: AI’s energy needs will rely on coal for baseload power (no quick alternatives); sector hammered post-Trump win (down sharply), trading at 3x EBITDA with high free cash flow; includes met coal for steel and thermal coal for plants.
  • Upside Potential: Valuations at multi-year lows could see 50-80% rallies as AI demand explodes; COAL ETF offers diversified exposure, potentially tripling if hard assets migration accelerates.
  • Upside Potential: “Big, beautiful coal” under Trump policy plus AI bottlenecks could drive 100%+ returns over 1-2 years, outperforming tech as hidden AI play with minimal competition from investors.

The information provided in this podcast and newsletter is for informational purposes only and does not constitute financial, investment, or professional advice. The views expressed by the host and guests are their own and do not necessarily reflect the opinions of any organization or company. The host and guests may maintain positions in any securities discussed on the podcast. Always consult with a qualified financial advisor or professional before making any investment decisions

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