For much of the last decade, a small group of tech giants powered the U.S. stock market to record highs. These companies were central to many investors’ portfolios. However, in 2025, this trend has sharply reversed.
Although the S&P 500 has returned to positive territory this year, recovering from the impact of President Donald Trump’s unpredictable trade policies, top technology firms like Apple, Alphabet, Amazon, and Tesla remain under pressure. The Bloomberg Seven Index—which tracks these firms plus Meta, Microsoft, and Nvidia—has underperformed the broader S&P 500. If this continues through the end of the year, it would mark only the second time in the past decade that this has happened.
Other Sectors Lead Market Gains
Last year, tech and telecom stocks soared by over 35%, fueling the S&P 500’s 23% gain. This year, however, traditionally slower sectors such as industrials, utilities, and financials are driving the market’s rebound. Whether big tech can regain its dominant role in 2025 is a critical question for investors as they prepare for the second half of the year.
Rick Gardner, chief investment officer at RGA Investments, said, “The market is starting to focus more on individual companies, their financial health, and innovation. The uncertainty about tariffs no longer dominates the conversation. The outlook for the U.S. economy and technology looks bright.”
Gardner has been buying big tech stocks recently as the market rallied, though the rebound has been less strong than expected.
Hedge Funds Return to Stocks
Professional investors also appear to be returning to equities after cutting positions during the uncertainty caused by Trump’s trade war. Data from Goldman Sachs shows hedge funds snapped up U.S. stocks on Tuesday at the fastest pace since April 9, when the S&P 500 surged after Trump delayed tariffs. Technology stocks benefited the most from that buying.
Risks Remain High for Tech Stocks
Despite optimism, there are risks. Tech stocks have risen sharply over the past decade, making them vulnerable if economic conditions worsen. Over ten years, large-cap tech stocks gained 2,179%, compared to the S&P 500’s 181% (excluding dividends).
Morgan Stanley’s chief investment officer Lisa Shalett commented, “I think we’re going to stagnate. The numbers are hard to believe.”
Notably, hedge fund manager Michael Burry, famous for betting against the housing market in 2008, purchased put options on Nvidia this year. These bets could profit if the stock price falls, though filings suggest they might also be hedges.
The Big Question: What If Tech Stocks Bounce Back?
The “Big Seven” tech companies represent about one-third of the S&P 500’s market value. If these companies start outperforming again, the index could rise significantly.
Gardner believes new highs are possible. “I don’t want to be bearish on our tech sector and innovation right now,” he said.
Since the S&P 500’s low in April, the tech sector has led the recovery, rising 31%, compared to a 20% gain for the entire index.
Mixed Performance Among Tech Giants
Not all big tech firms have struggled this year. Meta Platforms and Microsoft are up 9.4% and 7.8%, respectively. Both have faced less tariff impact and reported strong earnings. Nvidia’s results, due May 28, are expected to be roughly flat.
Economic Uncertainty Continues
Investing in tech remains risky. President Trump’s 90-day tariff pause ends in July, and hardline tariffs may resume. It is unclear whether tariffs will slow U.S. economic growth or push inflation higher.
So far, companies have absorbed most tariff costs. However, Walmart recently warned consumers will soon see price increases as firms pass on higher costs. Consumer confidence in the U.S. is near a record low, while inflation expectations are at multi-decade highs, according to a University of Michigan survey.
China Exposure Hits Tech Stocks Hard
Many big tech companies rely heavily on the Chinese market, which faces the highest tariffs. For example, Apple’s iPhone, a key product, is still mostly made in China. China accounted for 17% of Apple’s revenue in 2024. Apple recently missed sales expectations there, leading to a $700 billion drop in market value since December.
Alphabet is also worried about competition from AI chatbots like OpenAI’s ChatGPT. Recently, Apple reported a decline in searches on its Safari browser.
Market Outlook: Broader Strength Encouraging
Despite challenges, there is hope. George Maris, chief investment officer at Principal Asset Management, said the S&P 500’s rebound without tech leading is a good sign.
“You don’t always need the biggest stocks to lead a strong market,” he said. “Broader participation across sectors makes for a healthier market focused on fundamentals.”
