Strategist vs Manager: Who is right about Big Tech?

Tema ETFs strategist Paisley Nardini says fourth-quarter guidance points to the first earnings deceleration among the Magnificent Seven since 2022, while earnings for the other 493 S&P 500 companies accelerate. Nardini expects capital expenditure to peak in 12 to 18 months; Aptus Capital Advisors' David Wagner disputes the proposed baton pass, saying the arithmetic does not work.

Analysis

The investment question is not whether earnings growth broadens, but whether the rest of the market can add enough aggregate earnings to offset any slowdown in a small group of mega-cap weights. A rise in the number of companies accelerating is not, by itself, a reason to expect index leadership to change: compare contribution to S&P 500 earnings growth, estimate revisions, and margins—not company counts. That is the key test of the “baton pass” arithmetic.

Capex is a separate, longer-dated risk. A plateau in spending would weaken incremental growth expectations for parts of the AI infrastructure chain, but would not automatically mean falling revenue: installed capacity can still be filled, and spending may shift among compute, networking, power, and cooling. The downside case strengthens if company guidance and supplier order books show actual cuts rather than slower growth. The 12–18 month horizon makes this a poor basis for an immediate broad short absent confirming data.

Near term, guidance and revisions are the catalysts; over 1–3 months, watch whether breadth translates into aggregate earnings contribution and relative performance. Over 6–18 months, monitor capex plans and utilization. The signal is currently low-conviction: neither a rotation nor a capex peak is established by the views cited.

Key Decisions for Investors

• Avoid an outright rotation trade on the breadth claim alone. Track equal-weight S&P exposure (RSP) versus cap-weighted exposure (SPY) alongside earnings-revision breadth; consider a gradual RSP-over-SPY tilt only if non-mega-cap earnings contributions improve, not merely the count of companies accelerating.
• Treat capex-peak exposure as a watch item, not a short thesis. Before shorting semiconductor or data-center infrastructure exposure, verify forward order trends and guidance across suppliers; a plateau in spending without order cancellations would weaken the bearish case.
• Falsification of the rotation thesis: mega-cap earnings contributions remain dominant while estimates for the other 493 fail to rise. Falsification of the capex concern: spending plans and supplier orders continue to accelerate through the next guidance cycle.
• No high-conviction trade is warranted from this limited evidence. Reassess after the next earnings and guidance round, separating reported results from management outlook and checking whether revisions broaden in dollar-weighted terms.