The long-awaited rotation in equity markets is underway as investors shift capital away from the over-concentrated tech giants, known as the Magnificent Seven—Apple, Microsoft, Alphabet, Amazon, Tesla, Nvidia, and Meta—and diversify into a broader array of opportunities.
For the past two years, these companies fueled remarkable gains, surging more than 160% between 2023 and 2024 and driving much of the S&P 500’s performance. However, in 2025, that momentum has stalled. According to deVere Group CEO Nigel Green, while the overall S&P 500 has edged up by just 4% this year, the tech titans have barely moved, with some, including Tesla, Microsoft, and Alphabet, experiencing significant losses.
Green attributes the shift to a combination of factors. “Valuation concerns are mounting, with Big Tech trading at stretched price-to-earnings ratios that may not be sustainable,” he explained. He noted that the massive investments in AI infrastructure, cloud computing, and data centers are raising long-term profitability questions.
Moreover, higher interest rates—expected to remain elevated—are particularly challenging for tech stocks, which are more sensitive to borrowing costs. After two years of extraordinary gains, investors are now locking in profits and seeking undervalued areas to reallocate their capital.
This movement is also opening doors for new winners both in the US and abroad. In the United Kingdom, large caps in sectors like energy, healthcare, and consumer staples are attracting increased attention, boosted further by a weaker pound that enhances export competitiveness.
Domestically, US small caps are gaining traction, often viewed as a barometer for economic health. Additionally, industrial and energy stocks are drawing fresh interest as the tech sector’s explosive growth cools off.
For decades, growth investors have followed a familiar playbook—pouring capital into tech stocks and overlooking traditional valuation metrics. Now, that strategy is being challenged by a broader call for diversification and value.
“The Magnificent Seven remain among the most powerful and cash-rich corporations in the world, but their ability to dictate the entire market’s trajectory is diminishing,” Green remarked.
As the rotation gains momentum, investors who recognize and act on this structural shift may be best positioned to capture emerging opportunities in a market that is increasingly favoring breadth over concentrated tech dominance.
