When financial markets face serious turmoil, even the titans tremble. The past month has been a stark reminder of this truth, as global stock markets shook in the wake of United States (US) President Donald Trump’s reimposed tariffs on 185 countries, followed by the 90-day pause and a bout of further flip-flopping that has left the markets confused and frustrated.
And ironically, among the stocks that were hardest hit globally were the “Magnificent (Mag) Seven” tech titans from the United States: Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia and Tesla, whose products touch an array of vital industries and whose market capitalisations run into the trillions of dollars, eclipsing entire other stock markets. But beyond the news of the moment, a larger, more systemic shift in the technosphere is also underway, which we need to wake up to, and which could have profound effects on the investment industry for years to come.
So, what do these shifts spell for investments into Mag Seven stocks and technosphere at large?
The Fragility of Giants: A Wake-Up Call for Investors
While the world’s top tech companies have underpinned much of the past decade’s growth in global equities, recent sell-offs exposed their vulnerability to macro shocks. The Mag Seven lost hundreds of billions in combined market value since before the tariffs were paused for 90 days and stock prices shot up again. Nvidia, which was previously the poster child of the AI boom, took a few serious hits as a result of growing fears that new tariffs could disrupt semiconductor supply chains and inflate costs, and since the US government barred it from exporting its best AI chips to China.
Semiconductor Strength Amid Supply Shock
Let’s begin with the engine room of the AI revolution: semiconductors. Nvidia, whose graphics processing units (GPUs) power everything from AI models to cloud data centres, has ridden a wave of extraordinary demand over the past 18 months. In fact, before the tariff turmoil started, the global semiconductor market was projected to grow by 11% year-on-year, reaching a market size of $697 billion because of the booming demand for AI applications and cloud infrastructure. The way people work now – as more knowledge workers begin to rely on generative AI tools – are also boosting demand for more and larger data centres and cloud storage.
But that growth story now has a shadow. The reintroduction of tariffs has sparked fears of higher input costs for tech companies that rely on Chinese manufacturing capacity. And while Trump is demanding that China capitulate by coming to him “to make a deal”, China has responded with defiance. For Nvidia, the turmoil creates two challenges: potential production cost increases, and new uncertainty about the regulatory environment in which it operates, just as it was reaching new heights of valuation and influence, will remain hard to navigate.
Big tech’s valuation pressure headaches
While the Mag Seven continues to see remarkable growth, their valuations have come under pressure because of maturity and “outperformance”, and the resulting sense that their share prices have moved beyond fair value, Tesla not included, which is facing its own set of recent issues with competitive forces in China. Another factor to consider is that, as heightened geopolitical risk and tariff volatility severely affect sentiment in the US and global trade, regions like Europe, which have been trading at a discount to the US, may now benefit from the mass exodus from US stocks into rest-of-world stocks. The tech companies have been hurt the most by this rotation, given their outperformance.
Stiff competition from China
As if regulatory hurdles weren’t enough, Nvidia and other US-based tech firms now face formidable new competition from China. DeepSeek, the cutting-edge AI firm backed by Huawei, has emerged as a real contender in the race for large language model (LLM) dominance, while BYD is one of the fastest growing electric car companies in the world in terms of sales volumes.
When we look at the global AI race, the US had a near-monopoly on AI leadership, but China is aggressively narrowing the gap through government-backed funding and partnerships that link cloud computing with advanced AI capabilities. While we do however believe AI supply will be globally democratised in time, we still see the enormous investments US companies have made into their products, and consumer reliance on them, paying off in the near term.
Are We in a New Dot.Com Bubble?
Comparisons to the late 1990s are inevitable when tech valuations soar. But this time is different. The companies at the heart of the Mag Seven are not speculative start-ups with perceived growth potential – they are massive profit-generating machines with global reach, diversified revenue streams, and war chests of cash. In contrast to the Dot.Com era, where valuations were often based on hope rather than earnings, today’s tech giants are delivering real results.
However, what they share with their Dot.Com predecessors is a vulnerability to over-expectation. The recent pullback has less to do with weak fundamentals and more to do with investor recalibration. After months of outperformance, any whiff of uncertainty – whether geopolitical or regulatory – could spark a sell-off.
The long game: Innovation still wins
We often think of risk in terms of what we might lose. But in times of upheaval, the risk of missing out on long-term growth can be just as damaging. While the technosphere is undeniably shifting—regulations tightening, new competitors rising, geopolitics becoming more complex—the underlying direction remains clear: the world is moving toward more data, more automation, more intelligence.
The companies that can continue to invest in R&D, navigate regulatory minefields, and scale globally will emerge stronger. And the investors who can stay focused on long-term fundamentals rather than short-term noise will be the ones who benefit.
How Should Investors Respond?
It goes without saying that the current investment environment calls for very careful discernment. I believe the market has overcorrected on the back of short-term political risks, overlooking the powerful structural themes still supporting the Mag Seven, particularly when it comes to data growth, AI deployment, and digital infrastructure. These are not trends or investments that dissipate overnight.
Investors should, however, remain cautious in the near term. If tariffs continue escalating or a broader economic slowdown materialises, even high-quality tech stocks may see further volatility. But, as we have seen this month, that volatility could create rare opportunities to acquire shares in best-of-breed companies at attractive valuations.
Final Thought: Don’t Fight the Future
As we look ahead to the rest of 2025 and beyond, the investment landscape remains volatile, but full of promise. The recent market pullbacks should be viewed not as a death knell for the Mag Seven, but as a reset – a reminder that even the mightiest need to adapt to survive.