Move Over, Magnificent 7, Now There's the AI 11

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Travis Hoium discuss:

• Who’s part of the “AI 11”?
• What’s better for investing in trends: single stocks or the basket approach?
• The frothy valuations among the AI 11.
• ON Holdings, Under Armour, and Adidas earnings.
• What to watch in the athletic apparel industry.
• Mailbag: What to make of DraftKings and Flutter Entertainment with the threat of prediction markets?

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

This podcast was recorded on May 12, 2026.

Tyler Crowe: The Mag 7 was so 2023 today on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today, I'm joined by longtime Fool contributors Matt Frankel and Travis Hoium, who's pulling in some spot duty, away from the host chair and doing some actual hard-hitting analysis for us today. We are going to get into the state of athletic wear with some earnings results coming out of Nike, On Holdings, and some others. We're going to get into a listener question on gambling stocks. Travis, guys, is it gambling stocks, gaming stocks, sportsbook? How are we supposed to call these things these days?

Travis Hoium: The gaming world is what I would normally use if you're talking to people in the gaming industry. But that really gets confusing with games themselves. Gambling is probably the right way to go.

Tyler Crowe: I feel like we're just going mask off now and just be “They are gambling stocks.” Let's not try to hide anything anymore.

Travis Hoium: It's really good.

Tyler Crowe: We're going to start today with what we said the headline is, basically move over the Mag 7, we got a new moniker now. It's the AI 11. Yardeni Research put out a note yesterday, as research companies love to do when we're talking about stocks and dissecting things, is they put out a new moniker, what they're calling the AI 11. This is basically a basket of stocks that are tied to the infrastructure build-out. I think if you squint really hard, it's basically a semiconductor basket, if you will. We've got semiconductors in memory with Sandisk, Western Digital, Micron. We've got chipmakers Intel, Samsung, AMD, Marvell Technologies, Taiwan Semi, Broadcom. I can't also forget SK Hynix and ASML, as well. That's the 11 stocks we're talking about here today. A fun little pivot to what we normally talk about because this is obviously a play to drum up their name for themselves in terms of new ideas for people to get investing in. We could chalk this up to a silly Wall Street game and short-term thinking. But I think there's something worth exploring here. It's the idea of picking baskets of stocks versus individual stocks in thematic investing. When a trend has longer-term catalysts, and we can debate the AI infrastructure build on the length of it, I think, for days, do you think it's better in those instances to invest in a basket or individual companies within that trend? Travis, I'd love to get your thoughts on this as the analyst guests today.

Travis Hoium: The answer can be both. I think this is what makes investing both fun and challenging is that I think we really like to look at those individual companies. I would love to say, I'm going to be able to pick the winner in any given space. But the reality is, and something I’ve learned over decades of investing at this point, is you can get the theme right, the industry trend right, and get the individual stock wrong. I think the idea of using baskets is not a bad idea. I don't know if this is necessarily the best basket to be buying right now in May 2026, but it definitely tells a story about what's going on at the market.

Matt Frankel: First of all, I don't know how you can call this the AI 11 without Nvidia being included in the basket. I don't know. It's about time.

Tyler Crowe: Well, they're part of the Mag 7, Matt. Come on. We got new names, new ideas here. Come on.

Matt Frankel: I know that they're trying not to have overlap, but even so, you can't call it the AI 11. It's about time we had a new top stocks basket. It seems like the Fang thing was so long ago. The Mag 7, it's been the market's gold standard for several years. But to really answer your question, I like the basket approach, but tend not to just include the stocks at the top when I'm forming a basket, whether it's fintech, whether it's real estate, all the things that I focus on. Now, in recent years, it hasn't been the best strategy, if I'm being fair. The Mag 7 has clearly outperformed all the mid cap and small-cap baskets of tech stocks I could have made. I'd expect the 11 stocks in this particular basket, we could debate whether you think it's a bubble or whether you think it's a good time to buy, like Travis said. But I would expect them to generally move more in tandem than I would the Mag 7, because they really all plays on the same thing, AI-focused hardware. They're not just the largest tech companies in the market, which is essentially what the Mag 7 are. Travis makes a really good point that it might not be the best time to buy this. At least, these are all stocks that could tumble if the AI investment surge cools off, and that really goes along with the movement in tandem of this basket that you need to expect.

Tyler Crowe: I'm going to put a pin in the "Is it a bubble?" Because it feels like it's the obligatory question that we ask with any AI-related segment that we do on this radio show at any given time. But before we do that, I do want to say that of the 11 companies we just mentioned here, which of those ones are you particularly interested in the most, regardless of valuation, business? What are the ones in that group of 11 you're like I do really like this business?

Travis Hoium: Taiwan Semiconductor has got to be number one because almost every one of these companies are going to be reliant on Taiwan Semiconductor in one way or another, whether they're an equipment company like ASML, selling to Taiwan Semiconductor or they're a customer. That's probably going to be the company to watch. Now, that is a little bit more of a, it's more capital-intensive business. It is also at least a little bit cyclical, but probably not going to be nearly as cyclical as something like a Micron or a Sandisk. That would at least be the bellwether. If I only had to pick one, that would definitely be the one.

Matt Frankel: For me, the one I own in the basket is AMD, and it's been a roughly 5X performer in a year and a half since I've owned it. I bought it as a value investment, and I didn't think I'd be this right this fast. There's a solid case to be made that it's run too far. It's trading for about 50 times forward earnings. There's the rapid Data Center growth. Tyler and I, we've talked about the potential with the CPU shift in the next phase of AI build-out. They have a lot of extremely promising product rollouts coming later this year. I think all 11 are excellent businesses. Don't get me wrong. Some are a little bit, let's call them frothy, at the current valuations.

Tyler Crowe: Again, getting to the obligatory AI bubble, is it a bubble? One of the things about monikers that we get with baskets of stocks, this has happened for decades. There's nothing Wall Street loves more than putting a name on a group of stocks and making it seem cool for everybody. Some of them worked. FANG worked. Kudos to Jim Kramer, 2013. FANG worked pretty well from then on, Facebook, Amazon, Netflix, Google. Great idea. Mag 7 2023, so far, it's been a great idea. I've got other ones. The Four Horsemen of the 1990s. I think it was like Intel, Cisco, Dell. I forgot the fourth one.

Travis Hoium: Microsoft.

Tyler Crowe: Not a great idea. Microsoft. At the time, not a great idea. The Nifty 50 in the 1960s, I think of all of them, maybe Home Depot and Walmart. After that, it was [NOISE]. Mixed results for these moniker names and for a lot of people to be that must be the top whenever you start using names like this. In that vein, I'm going to let you guys have it out because I think there's differing views on, is it a bubble? Travis, you've already made your view pretty clear here. Lay out your case.

Travis Hoium: Well, AI, I think, is very confusing for investors right now because there is a ton of tailwinds, and that is completely undeniable. You look at what's going on with particularly memory's really hot right now. Those prices are going crazy, margins are going up, but you have to look historically in what's sustainable and what's not sustainable. I actually pulled all 11 of these companies, and if you added up their free cash flow in 2023, so before this current wave, it was negative. These 11 companies were all negative in 2023. By the way, they were very positive, if we go back to 2018, $85 billion worth of cash flow. Now that's up to 123 in 2025. These are inherently cyclical businesses. AI has been a tailwind for them.

Historically, that does not last in these businesses forever. Once you get some choke point in the industry, like memory is today, developers are going to figure out how to optimize a little bit better, hardware companies are going to change what they're buying and when they're buying it. Companies are going to overinvest in capital expenditures. That's why is this is indicative of what I'm seeing as a bubble in artificial intelligence. That doesn't mean that that bubble is going to burst. It may be 1998. We may have another two or three years left. But just this is where I get a little bit nervous about, am I buying at the top or too close to the top for comfort?

Matt Frankel: We're fairly aligned on this. I can see both ways. I wouldn't necessarily buy this basket of 11 stocks today, but I also wouldn't bet against them in any form. With AMD, for example, the one that I own and talk about, I can see a scenario where it's $1 trillion company or even a $2 trillion company by the end of the year. But I can also see a scenario where it gets cut in half if one of its product launches doesn't go as well as expected, for example. I wouldn't necessarily call it a bubble, but it's definitely a fragile environment when it comes to the AI spending that we're seeing. Not that it can't continue for years, even more than two or three years. This could be a long-term trend for the next decade. How many of us called the Mag 7 expensive when we first heard that name? I wouldn't bet against them in any way. I wouldn't call it a bubble, but they need things to go well.

Tyler Crowe: My $0.02 to it, too, I think a lot of it is priced in the idea that everything that is happening in its current trajectory is going to stay on that trajectory for 4, 5, 6 years, which may be.

Travis Hoium: Has that happened three months in artificial intelligence.

Tyler Crowe: But to your point, one of the things that I have discussed here before is the idea of there is going to become a point where efficiency and cost efficiency and the cost per token or the compute per token or some way of bringing down costs or usage for these algorithms is going to take place. The amount of resources that we have to put behind this is so staggering. It's hard to wrap my mind around. Unless you have some breakthrough in compute power with I don't know, major breakthroughs in quantum computing, or all of a sudden energy becomes way cheaper than it is today, or we just get better algorithms. I'm going to bet on the better algorithmic efficiency thing and say, it's going to continue to grow, but perhaps not at the same rates. Again, I think we're all on the same page with just some slight nuances on where it's all going to go. All in all, fun idea, we'll see. Coming up next, we're going to look at a very different topic: athletic wear.

ADVERTISEMENT: Dell PCs with Intel Inside are built for the moments that matter for the moments you plan and the ones you don't. Built for the busy days that turn into all night study sessions, the moment you're working from a cafe and realize every outlet is taken. The times you're deep in your flow, and the absolute last thing you need is an auto update throwing off your momentum. That's why Dell builds tech that adapts to the way you actually work, built with a long lasting battery, so you're not scrambling for the closest outlet and built in intelligence that makes updates around your schedule, not in the middle of. Don't build tech for Tech, say. They build it for you. Fine technology built for the way you work at dell.com/dellpcs, built for you.

Tyler Crowe: If you were to look at the athletic wear, athletic footwear, clothing industry today, I feel like you could play a game, and that game would be, is it an actual headwind or is it a management excuse? Over the past couple of quarters, we've seen some pretty conflicting stories coming out from various players in this industry. Over the past couple of days, Under Armour, On Holdings, and Adidas have recently reported, and we got some pretty conflicting numbers or conflicting commentary on those numbers, depending on how well a company did. Before we get into the nitty-gritty of everyone else in the industry, the two of you, what were some of the earnings reactions you had or thoughts, conference calls, what did you see in any of these reports that really stood out to you?

Matt Frankel: Well, I noticed a few common themes among them. As you said, all three of the companies you just mentioned had very different performance. But there were some common themes. For example, all three are seeing meaningful hits from tariffs to the business in one extent or the other, with Under Armour taking the worst hit. In all three cases, direct-to-consumer sales, meaning like sales through a website, are outperforming wholesale. For all three, apparel sales, this is interesting, are growing faster than footwear sales, because all three of these are footwear companies at heart. Or at least declining less rapidly than footwear sales in Under Armour's case.

All three are facing challenges in the U.S. market. Consumer spending has slowed down quite a bit. Even on the biggest growth story of the three reported slower revenue in North America than it did everywhere else. For me, just looking at these reports on is the most attractive and it's not very close. Accelerating growth and margin expansion in a difficult environment for consumer spending is impressive. Gross margin improved by more than four percentage points year over year, despite the tariff headwinds that contracted gross margin for the other two. Extremely strong growth in Asia Pacific, and there's a lot more room to grow there. As far as what I wouldn't do out of the three, I wouldn't touch Under Armour. It seems to be a restructuring story with no clear path to finishing restructuring and recovering. Adidas is a great business, just not as exciting of a growth story as on to me.

Travis Hoium: The consumer has got to be the big takeaway, and it's both good and bad. I think Under Armour and Nike are probably in the same category. Sorry, Nike shareholders, but they've moved much closer to that discounting. We're going to win on price. We're not going to out-innovate everybody else. I think what investors need to look at is those companies that are playing defense who are discounting. We need to move product through the ecosystem so that we're not sitting on a whole bunch of inventory. That's where you get a little bit of weaker margins. That's where you get commentary about things like tariffs. If you look at the results from On in particular, I always think their conference calls are really interesting because a year ago when the tariffs were the big topic, they just said, We're going to raise our prices. You know what? If there's tariffs, we're going to raise our prices. We're going to keep our margins, and that's the way it's going to work. They were making a dig at the industry going, In a really promotional environment, we don't need to promote. We're going with a full price strategy. That just shows you where companies are in the industry and where their pricing power lies.

I think that's the biggest thing that we have to look at, is where is their pricing power? Where is their demand? It still exists at that high end of the market. The people who are spending 200, $300 on a pair of shoes. Most consumers who are spending money on a pair of shoes that are spending $50-100 or even $150 are looking for a little bit better deal or buying shoes for kids like I do. Sorry, my kids aren't getting On Holding shoes. I'm not spending that money, but Under Armour that's a much more attractive price point. I think that's just generally where the economy is going today. I think that's the broad takeaway.

Tyler Crowe: I think, to your point, too, Adidas was interesting in that way, where you could see, they even mentioned in their earnings statement. It was like, we did some discounting here, but on our fresh, innovative products, we're actually driving a lot of price, and they did see margin expansion on the operating side overall because of that pricing effect there versus the discounting they're doing on some of their older stuff. To that same point, Deckers, they don't report, I think, until the 21st of May, but on their previous quarter, they were mentioning the same. Strong performance in HOKA with basically we passed as much of the cost we can, on the consumer as we could to fight tariff headwinds. I can say, buying my trail running shoes from HOKA, I can confirm. They have definitely been pushing price versus trying to go down the discount route. In this vein as you are looking at the retail space, Travis, I know On Holdings has been one of your favorites for quite a while now. Is there anything else in this space that looks intriguing to you? Then, Matt, you said On Holdings as well. Is there anything else in this industry that you're watching, keeping an eye on how is this thing developing more, and are there any other interesting stories that people could be watching over the next couple of quarters?

Travis Hoium: To me, sits alone in this category. If you look at the Lululemon or Nike, the other turnaround stories in the market. I have a really hard time figuring out where there's pricing power, where's the tailwinds in the industry? We're moving to this, working out, maybe running, maybe lifting is the trend for users. We're not in the Yoga is a growth category anymore. I think those are the big things that I'm looking at, is who has that pricing power? On just sits alone in that category. They said a couple of years ago when they put out their long-term guidance, said, We're going to get to 60% gross margins. They're almost at 65% gross margins. That's showing you the strength of that business. I just don't see that same analogy with even Deckers Outdoor. HOKA just isn't quite growing as quickly as they don't have quite the same pricing power. I think they just sit alone, and that's why I find them attractive. Now, that said, this is also one of the most confusing companies to follow because they consistently report in Swiss francs, and the market, quarter after quarter, seems to be confused about currency conversions and how much they’re actually growing. It is a difficult company to follow from that perspective.

Matt Frankel: I would just add. I already gave my little spill on On Holding a little while ago. But I would say, as far as the three major turnarounds, Travis just mentioned Lululemon, and I'm glad he did, because between Lululemon, Nike, and Under Armour, Lululemon, to me, sounds is by far the most attractive of the three turnaround candidates. The reasons I say that one, like On Holding, but not to the same extent. They have more pricing power than either Nike or Under Armour in this market. They just made some missteps in their marketing strategy. For example, the percentage of new products, meaning like new lines, new styles in their stores, steadily declined over the past few years, and that drove customers away because they don't want to go and buy the same things they already had. They're making a conscious effort to remedy that, focusing on new products, focusing on reasons for customers to set foot in their stores. They have the pricing power. I like what management's doing. I think they're making all the right moves, and out of the three turnarounds, that's the one that I like right now.

Tyler Crowe: I might go a little off topic here, but based on some anecdotal evidence, I might be waiting for the Alo Yoga IPO whenever that comes because I feel like that might be pretty interesting.

Travis Hoium: That one would be really interesting, yes.

Tyler Crowe: Coming up after the break, we'll dip into the mailbag. Hey, everyone, just a quick reminder. We love answering your questions on air, so if you do have them, go ahead and email us at podcast@fool.com. That's podcast@fool.com. We only have three requests when you bring them in. Number one, keep it Foolish; number two, keep it short enough that we can read it on air; and number three, we can’t give personalized advice. We might get in a little bit of trouble with the SEC or the Federal Trade Commission, if we do. Try to keep it as a generic, what should investors do rather than what should I do?

Today's question comes from Jack from Denver. Hey, guys, love your podcast. As a novice, when it comes to stocks, I have been interested in some of the gambling stocks, mainly DraftKings and Flutter, Tickers DKNG and FLUT. Flutter, of course, owning FanDuel. Since their recent drawdowns, I think, mostly related to prediction markets these days, what are your thoughts on these stocks being viable long-term winners with the competition from prediction markets coming? Thanks, Jack from Denver. Travis, I don't know about sportsbook, but I know that you have followed the Las Vegas casino industry for a long time.

Travis Hoium: Yes.

Tyler Crowe: What do you think of Jack's question here?

Travis Hoium: One of the things I really struggle with these online gaming companies is what is the moat? What is actually keeping you in that ecosystem and keeping those companies profitable? The hard answer has been there really isn't one. If the better odds are just a click away, they're just a click away. Most of these users are going to have multiple accounts. You have a lot of competition in every one of these states. The other piece that I think is really challenging is the tax rates in each of these states. If these companies suddenly get really profitable in I think it was Illinois recently, Illinois just goes, Wait a second, we want to have a little bit of that revenue, and they just jack up their taxes. That ultimately hits the bottom line of these companies.

This is a space that I've only invested in tangentially through MGM Resorts. They have an online gaming business, 50/50 joint venture with Entain. They also own some of their operations internationally. That's the way that I have done it because I look at it as more of a value. You're actually getting a free cash flow positive business. I know that the operations have improved in some of these online gaming companies recently, but I just really struggle with what the moat is if you don't have some physical tie. I think that's the challenge. Now, prediction markets come in, Look, that is a real threat, and I think that the legality of that may change in the near future. But that just shows you what they're playing a digital game, and I don't know that there's a huge moat there.

Matt Frankel: Even in person, you make a good argument there. If you and I are at Vegas at Caesar's and you tell me I can get better odds on the bet I want at MGM, I'm going to leave. I'm not that loyal about it. But this is a good question. I'm going to answer more from the prediction market side of it. Sports wagers account for 85% of all bets on these "prediction markets platforms." It's gambling. This is what it is. Let's be totally honest about this. That can even be higher during major events. It's clearly a direct competitor to these gaming companies. DraftKings and Flutter, they're both down over 50% over the past year, and for good reason.

But on the other hand, I want to point out that it's still a very fluid situation, specifically on the regulatory side. That's going to be the biggest X factor to answer the question. Unfortunately, we don't have the clarity right now to answer it thoroughly. There are some pending lawsuits at the state level against prediction markets right now with the operators, they're arguing that the platforms aren't gambling, but they're selling "regulated financial instruments." There is a strong possibility that the argument is not going to hold up when we get to Supreme Court-level type cases. There's still a clear bullcase for online gambling in general. I don't think either of us are saying that trend is not real, but there's a lot of the regulatory side that's very much up in the air. If these prediction markets get shot down, DraftKing and Flutter, they're going to double in a very short period of time. It's a big if right now.

Travis Hoium: Another way to get exposure to this space. The real challenge that a lot of these companies have is customer acquisition cost. Where is that money going? That's going to companies like ESPN, owned by Disney. It's going to advertising on Spotify. If you listen to Bill Simmons' podcast, constantly talking about FanDuel. There are other adjacent ways to play the market where you're actually investing in where they're spending those customer acquisition dollars, not necessarily on the platforms themselves being profitable.

Tyler Crowe: Before we wrap this up here, when we hear the regulatory thing, part of the reason prediction markets are the way it works in that way is it's more tax efficient for you because it's a commodities future. If you get it wrong, you can deduct the entirety of the loss on your taxes, versus if it's a sports book, you can only deduct a portion of it because it's considered gambling deductions, which are considerably smaller than futures contracts. When you hear the regulatory and more attractive, that tends to be part of the reason why and also why prediction markets can times offer more favorable bets simply because they know that there's a more favorable tax treatment and they can get more people on their platform. If you hear the regulatory thing, that tends to be part of the reason why they're more attractive. I want to get that in before we finish.

But that is all the time we have for the day. Matt, Travis, thanks for joining us today. I think we're doing a home at home, and I'll join you tomorrow Travis on the show. As always, people on the show may or may not have interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertisers. Advertising is through sponsored content provided for informational purposes only. To see our full advertising disclosure, please check out our shows. Thanks for producer Dan Boyd, the rest of The Motley Fool team. For Travis, Matt, myself, thanks for listening, and we'll chat again soon.

Matt Frankel, CFP has positions in Amazon and Walt Disney. Travis Hoium has positions in Alphabet, Intel, MGM Resorts International, On Holding, Spotify Technology, and Walt Disney. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Alphabet, Amazon, Broadcom, Cisco Systems, Deckers Outdoor, Home Depot, Intel, Lululemon Athletica Inc., Marvell Technology, Meta Platforms, Micron Technology, Microsoft, Netflix, Nike, Nvidia, On Holding, Spotify Technology, Taiwan Semiconductor Manufacturing, Walmart, Walt Disney, and Western Digital. The Motley Fool recommends Flutter Entertainment Plc and Under Armour. The Motley Fool has a disclosure policy.