The development trend is beginning to diverge! AI has reshuffled the "Big Seven of Technology" in the United States

[Global Times special correspondent in the United States, Feng Yaren, Global Times special correspondent] "The era of the 'tech giants' of the stock market is over. The American "Business Insider" website reported on the 26th that the "Big Seven of Technology" composed of Apple, Google's parent company Alphabet, Facebook's parent company Meta, Nvidia, Tesla, Amazon and Microsoft's seven American companies now look less "huge", and even no longer a "group of seven". While the AI boom is driving tech stocks up, some of the Big Seven are facing the dilemma of being kicked out of the organization because of their slow deployment in AI. Industry insiders, who first put forward the term "Big Seven", believe that this divergence may mark the end of an era.

"I don't think these seven names will rise together"

Mike O'Rourke, chief market strategist at Jones Trading and chief market strategist of Jones Trading Firm, the inventor of the "Big Seven" narrative, wrote in a report titled "Rest in Peace in the Age of the Big Seven" that the dominance of the "Big Seven" over the stock market is coming to an end.

According to the report, in April last year, when O'Rourke coined the term "tech giants" (although some say the term was first coined by Bank of America analyst Michael Hartnett), the stocks of these seven companies contributed a staggering 88% to the market. Today, these companies have loosened their grip on the market. In January, Hartnett said the seven largest stocks accounted for just 45 percent of the S&P 500's gain. That's still a lot of money, but it's significantly less than it used to be.

On the 21st, Nvidia's earnings report was displayed on the screen in Times Square in New York, USA. (Visual China)

A growing number of investors are questioning whether the Big Seven can replicate last year's impressive performance. Agence France-Presse reported on the 26th that these seven stocks currently account for only 13% of the long portfolios of U.S. stock hedge funds, while the proportion of the Russell 3000 index is 25%. In addition, in recent months, the move by the founders of Amazon, Microsoft and other companies to reduce their stakes has intensified market speculation that it may now be the time for the end of profits on the shares of these companies.

Business Insider reported that the "Big Seven" took a different path as the market rally expanded. "I don't think these seven names are going to rise together," O'Rourke said. "Nvidia "took off on an artificial intelligence rocket", and its stock price soared, up 66% so far. Just a few weeks ago, Meta's earnings report was released, and its stock price set a record 20% rise in one day.

The performance of these companies is in stark contrast to Tesla, whose stock has fallen 22% since January due to a gloomy outlook for electric vehicle demand in the United States. Since the beginning of 2024, Apple has also struggled, with its share price falling by about 1.45%. O'Rourke said these companies still have a lot of influence in the market. Now the difference is that they will no longer go in the same direction, and the performance will begin to cancel each other out.

Artificial intelligence diversion

As for why the "Big Seven of Technology" parted ways, the "Business Insider" website analyzed that one of the main reasons is artificial intelligence, which everyone is talking about. According to an analysis by the Financial Times, Nvidia is leading the way in advanced semiconductors, Microsoft and Amazon mainly provide cloud storage, and Meta and Alphabet also have their own large language models. At the same time, Microsoft has begun to apply AI to its core products to improve productivity.

Apple, on the other hand, is not currently seen as a major beneficiary of the AI boom. According to an analysis by Business Insider, companies like Tesla, while they also want to see themselves as AI giants, still see the market as manufacturing cars at their core. "The difference in value and growth rate between these companies is so great, and the main thing they now have in common is that they're all super big and have performed well in the past," O'Rourke said. ”

Even though the "Tech Seven" are dividing, their overall power should not be underestimated. CNBC quoted the latest research report from Deutsche Bank as saying that the "Big Seven" have more financial power than most countries in the world. Deutsche Bank analysts stressed that the total market capitalization of the "Big Seven" alone will make it the world's second-largest stock exchange market, twice that of Japan, which ranks fourth. In addition, the market capitalization of Microsoft and Apple is not far from that of companies listed in France, Saudi Arabia and the United Kingdom combined.

This concentration of investments has led some analysts to express concerns about the risks in U.S. and global stock markets. Jim Reid, head of global economics and thematic research at Deutsche Bank, warned that the US stock market is in the midst of a period of "highest concentration" of investment, similar to the US tech bubble around 2000 and the US economic crisis of 1929.

The "Group of Seven" is being reshuffled?

Business Insider reports that the "Tech Seven" label may not be out of the picture, but as the performance of these companies continues to diverge, a restructuring of the "Tech Seven" is very likely. Dan Niles, founder and portfolio manager of the Sartori Fund, told CNBC that the "Big Seven Tech" should be left only with Nvidia, Meta, Amazon and Microsoft, or the "Fantastic Four." "Apple, Tesla's stock prices are falling this year, and Google's performance has lagged behind the market. The earnings of these companies are in trouble, and they have competition problems, which can be seen in the share price. Niles said the Fantastic Four did a very good job.

Jim Worden, chief investment officer at Wealth Advisory Group, told CNN that he believes the "Big Seven Tech" should be consolidated into the "Big Five," minus Tesla and Apple. Louis Navilier, founder of Navellier & Associates, a U.S.-based fund management firm, wrote in a note: "The 'Big Seven' of tech is undergoing significant change, and money is flowing to more small and medium-sized enterprises that thrive on sales and earnings growth." Naviglier believes that seven companies, including Dorian LPG Ltd, an ultra-large gas carrier operator in the United States, M-tron Industries, a U.S. optoelectronic component manufacturer, Novo Nordisk, a Danish pharmaceutical company, and PBF Energy, a U.S. energy company, will usher in amazing sales growth this year and are expected to beat the "Big Seven in Technology".

Still, some investors are bullish on the "laggards" of the Big Seven. Nancy Tengler, chief investment officer at Laffer Tengler Investments, an investment and wealth advisory firm, said her company plans to increase its stake in Tesla. She has a long-term bullish view on Tesla's stock, believing that the company's innovations in developing self-driving software and EV charging stations will help cushion the impact of demand issues. "I'm not going to cross out companies that are underperforming. Tengele said.