Big Tech Goes From Stock Market’s Safest Bet to Biggest Question

Over the past decade, a select group of major technology companies has fueled the U.S. stock market’s rise, driving indexes to new highs and dominating investment portfolios. However, that dominance has faltered in 2025. While the S&P 500 Index has managed to turn positive this year despite market turbulence tied to President Donald Trump’s shifting trade strategies, many tech giants like Apple, Alphabet, Amazon, and Tesla remain in the red.

‍

The Bloomberg Magnificent 7 Index—which comprises Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla—is trailing the S&P 500 this year. If this trend continues through the end of December, it would mark only the second time in the past ten years that this group of companies underperformed the broader index.

‍

This underperformance is a sharp contrast to last year, when tech and telecom stocks surged more than 35%, helping the S&P 500 post a 23% annual gain. In 2025, though, it's the more traditional sectors—such as industrials, utilities, and financials—that are leading the recovery. This shift raises a critical question for investors: Can Big Tech regain its market leadership in the second half of the year?

‍

Rick Gardner, Chief Investment Officer at RGA Investments, noted a change in investor focus. “The market is paying more attention to individual company fundamentals, innovation, and financial strength,” he said, rather than getting distracted by trade policy uncertainty.

‍

Gardner believes that the U.S. tech sector still offers a compelling story and has been increasing exposure to Big Tech for his clients, even though these stocks have underperformed recently.

‍

Gardner isn't alone. Other professional investors are also cautiously returning to equities after cutting back during the trade war-related market turmoil. According to Goldman Sachs’ prime brokerage data, hedge funds made their biggest push into U.S. stocks since April 9—the day the S&P 500 spiked 9.5% following Trump’s temporary suspension of tariffs. Notably, technology stocks were among the most heavily bought.

‍

Yet, some experts warn that tech stocks may still have room to fall. After an extraordinary surge over the last decade—where Big Tech shares delivered a staggering 2,179% return compared to the S&P 500’s 181% gain excluding dividends—valuations are stretched. “I think we’re going to stall out here,” said Lisa Shalett, Morgan Stanley’s chief investment officer, during an interview with Bloomberg Surveillance. “It’s hard to justify the numbers.”

‍

Adding to the caution, famed hedge fund manager Michael Burry, known for his prescient bet against the housing market in 2008, recently disclosed put options on Nvidia. These options, which profit when stocks decline, were noted in Scion Asset Management’s latest 13F filing. However, the filing also indicated the positions may be hedging other holdings not disclosed in the report.

‍

Investors are now grappling with a major “what if” scenario: What happens if the lagging tech giants regain momentum? The Magnificent Seven accounts for about one-third of the S&P 500’s total market value. If this group were to rally, the broader index could be poised for significant gains. “I think all-time highs are possible,” Gardner said. “I wouldn’t bet against American innovation.”

‍

In fact, since the S&P 500’s low in April, technology stocks have outperformed, climbing 31% compared to the broader index’s 20% gain. Some tech names have even bucked the downward trend in 2025. Meta is up 9.4%, and Microsoft has risen 7.8%, thanks to solid earnings and limited exposure to trade-related risks. Nvidia, meanwhile, has remained flat year-to-date and is set to report earnings on May 28.

‍

Still, risks loom. Trump’s 90-day tariff pause ends in July, and any return to aggressive trade measures could unsettle markets. There’s also concern that a consumer demand slowdown sparked by tariffs could reignite inflation and dampen the economic recovery.

‍

So far, businesses have mostly absorbed the costs of higher tariffs, but consumers may soon feel the impact. Walmart recently warned that prices will rise as it begins passing on the cost of new inventory. Meanwhile, consumer sentiment remains near historic lows, and inflation expectations are at their highest in decades, according to the University of Michigan’s latest survey.

‍

One of the challenges Big Tech companies face is their heavy reliance on China—a country hit hardest by Trump’s tariffs. For example, Apple still manufactures most of its iPhones in China, which also contributed 17% of its 2024 revenue. In its latest quarterly results, Apple reported a 2% decline in China sales, falling short of expectations. Since peaking in December, the company has lost over $700 billion in market value and now trails Microsoft and Nvidia in total market capitalization.

‍

Alphabet is dealing with a different issue: growing pressure on its search business due to competition from AI-powered tools like ChatGPT. In April, searches using Apple’s Safari browser declined for the first time, an Apple executive revealed during court testimony.

‍

Despite these concerns, some investors remain optimistic. George Maris, Chief Investment Officer at Principal Asset Management, said the S&P 500’s ability to rebound without Big Tech leadership is a positive sign. “You don’t need the largest companies to drive a healthy market,” he explained. “Broader participation across sectors points to a more stable and fundamentally sound environment.”

‍

Ultimately, while Big Tech’s future in 2025 is uncertain, the market’s resilience suggests investors are ready to look beyond just a few names and focus on a wider range of opportunities.

‍