The Magnificent Seven tech stocks are under pressure after second-quarter results from Tesla (TSLA) and Alphabet (GOOGL, GOOG) dampened investor confidence. Scott Chronert, Citi's head of U.S. equity strategy joins Market Domination to discuss his market outlook (^DJI, ^IXIC, ^GSPC).

Chronert notes that despite the market pressure, "the underlying growth trajectory fundamentally has not really changed." He explains that current valuations are stretched, necessitating a period of normalization, which he finds markets to currently be in.

"If we essentially stretched the implied growth and the valuations too high, then you allow what's perceived as a short-term disappointment to set up for a longer-term buying opportunity, and that's how we're thinking about the Mag Seven and the broader megacap growth construct right now," Chronert tells Yahoo Finance.

Regarding AI, Chronert believes that it will take time for AI-related spending to impact company revenues. He explains, "Where we think the longer-term element of AI is gonna come into play is it's gonna be in many cases almost imperceptible. It's gonna be under the surface in productivity improvement, improved profitability, and therefore valuations across a much broader swath of companies."

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This post was written by Angel Smith