5-Day Cash Flow Trade

The Magnificent Seven’s grip on the market is loosening by a measurable amount. MAGS, the Roundhill ETF that tracks the group, is up about 4% year to date as of August 31. The S&P 500 has gained roughly 13% on a total return basis over the same span. The Defiance Large Cap ex-Mag 7 ETF (XMAG) was up about 13% year to date as of the most recent month-end figures available (July 31). That gap is not noise. It is capital rotating into companies that are actually delivering on the AI premise rather than simply spending toward it.

Three names sit at the center of that rotation: Palantir (PLTR), ASML, and Broadcom (AVGO). Each earns its place for a different reason. Together, they describe a coherent thesis about where AI revenue is actually landing in 2026.

Palantir: The Revenue Is Real, the Valuation Is the Argument

Palantir’s Q2 report on August 3 was one of the cleaner data points of the year. Revenue came in at $1.935 billion, up 93% year over year. U.S. commercial revenue grew 149% to $764 million. U.S. government revenue jumped 90% to $809 million. The company raised its full-year 2026 revenue forecast to a range of $8.150 billion to $8.158 billion, up from prior guidance of $7.65 billion to $7.66 billion. The Rule of 40 score hit 155%, a figure that is nearly unheard of at this scale.

The bear case is real: Palantir’s price-to-sales ratio remains elevated, and the stock has been volatile through the year. But the fundamental divergence is hard to dismiss. William Blair reiterated its Outperform rating in late August and flagged that Palantir’s Maven Smart System is on track to reach an annualized revenue run rate of $1 billion. That is a defense revenue stream with no Mag 7 equivalent.

ASML: The Only Company That Makes the Machines That Make Everything Else

ASML does not compete with the Mag 7. It supplies them and every other chipmaker on earth. In Q2 2026, the company reported €9.3 billion in total net sales, above the high end of guidance. Management then raised full-year 2026 total net sales guidance to €43 to €45 billion. Installed Base Management sales, covering services and upgrades on machines already in the field, hit €2.8 billion in the quarter, about €300 million above guidance.

The key structural point: ASML has raised its 2026 outlook since earlier in the year, with the most recent increase meaningfully larger than the first. One risk to monitor is the MATCH Act, a U.S. bill that has been discussed as a potential further constraint on ASML’s remaining DUV exposure to China. China accounted for about 33% of ASML revenue in 2025. That exposure is the counterweight to an otherwise clean story.

Broadcom: The Mag 7’s Biggest Beneficiary That Is Not a Mag 7 Stock

Broadcom has quietly become the dominant position in the XMAG fund itself, but at a much smaller weight than some headlines suggest, around 2.7% in the fund’s published holdings. State Street noted in July that Broadcom is among the companies challenging Mag 7 constituents in global market capitalization rankings. Its custom AI chip business, serving hyperscaler customers who want to reduce Nvidia dependency, is the structural driver. The Mag 7 are collectively spending more than $200 billion on capital expenditures in 2026. Broadcom captures a portion of every dollar.

The broader read on these three names is straightforward. The Mag 7 earned their reputation by investing ahead of demand. In 2026, investors want to see that investment convert to durable cash flow. Palantir, ASML, and Broadcom already have that conversion in their numbers. That is the difference worth watching as September opens.