According to the Zhitong Finance APP, in the recent wave of market sell-offs, the stock prices of major American technology companies have plummeted, with their valuations significantly retreating from their recent historical highs. However, many Wall Street traders still believe that the overall downward trend in the stock prices of these tech giants has not yet ended, and the recent historical trends and price correction trajectories provide strong support for their cautious predictions.
Additionally, it is worth noting that Chinese tech giants have surged strongly since the emergence of DeepSeek, igniting a global influx of funds towards Chinese tech giants and the Chinese stock market. These Wall Street traders, who hold a cautious stance towards the &#34;Magnificent Seven&#34; of U.S. stocks and the S&amp;P 500 index, which is heavily weighted by these giants, seem to refuse to significantly &#34;buy the dip&#34; in the U.S. tech giants, instead beginning to embrace the &#34;Chinese AI investment frenzy,&#34; following the so-called trend of &#34;the East rising and the West falling.&#34;
Last week, the overall corporate valuation of the so-called &#34;Magnificent Seven&#34; in U.S. stocks—measured by the &#34;forward price-to-earnings ratio&#34;—plummeted to its lowest level since September of last year. This drastic change coincided with the S&amp;P 500 index falling 10% from its recent peak, entering what is referred to as the &#34;correction zone.&#34;
However, the current overall valuation of the &#34;Magnificent Seven&#34; in U.S. stocks is still significantly higher than the low valuations during the profit pressures of 2018 and 2022, and the uncertainties facing the U.S. stock market continue to increase. Whether it is the professional trading forces on Wall Street focusing on the &#34;buy the dip&#34; strategy or retail investors, there seems to be an increasing interest in the &#34;Chinese tech giants&#34; (such as the top ten Chinese tech companies) whose valuations are still much lower than those of the U.S. &#34;Magnificent Seven&#34; and have seen a dramatic turnaround in profit prospects with strong support from Chinese policies following the emergence of DeepSeek. This is also why the Nasdaq Composite Index has fallen for four consecutive weeks—this continuous decline suggests that the large buying forces that have long practiced the &#34;buy the dip&#34; strategy have not materialized as expected.
Is the once-reliable &#34;buy the dip&#34; strategy in U.S. stocks failing this time? The cheapest &#34;Magnificent Seven&#34; in months has failed to attract dip buyers.
Violeta Todorova, a senior research analyst at Leverage Shares, stated: “ While I acknowledge that valuations are much better than they were last December, I do not believe this is the bottom. I had considered a buy-the-dip strategy, but there are still too many uncertainties in the U.S. stock market, and I think the actual situation for the Magnificent Seven will further deteriorate before it improves.”
According to the latest data tracking from institutions, the so-called &#34;Magnificent Seven&#34; in U.S. stocks—namely Apple, Microsoft, Nvidia, Alphabet (Google's parent company), Amazon, Meta Platforms (Facebook's parent company), and Tesla—currently have an overall valuation of 26 times their expected profits for the next 12 months (i.e., a forward price-to-earnings ratio as high as 26x). This means that these stocks still have considerable room for valuation declines compared to the low valuation periods of 2018 and 2022 (approximately 19x forward price-to-earnings ratio).
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Statistics show that the Nasdaq 100 index, which has a stronger fundamental performance and includes the top technology companies in the United States, has rebounded for 6 trading days since reaching a historical high 17 trading days ago. However, so far, these increases have not been sustained, confirming that the massive buying on dips has not materialized as expected, and some buying forces have chosen to exit quickly after taking profits, rather than opting for long-term holding like the dip-buying camp in the U.S. stock market for a long time.
Despite a significant rebound in stock prices last Friday, the Nasdaq Composite Index, which is dominated by technology stocks, still fell 2.5% last week, and has retreated 11% from the historical high in February. In fact, from a weekly decline perspective, the Nasdaq has now fallen for four consecutive weeks, with the largest weighting company, Apple, recording its largest weekly decline in two years.
This decline sharply contrasts with the extremely optimistic scenario in the U.S. stock market a month ago. At that time, investors were optimistic about the Trump administration's policies to promote economic growth and regulatory easing, which led to the stock prices of tech giants like Alphabet, Amazon, and Tesla continuously hitting historical highs. However, as Trump and other cabinet officials clearly stated that they were willing to accept short-term economic difficulties and stock market losses to achieve the long-term goal of reshaping the U.S. economy, these expectations have completely evaporated. Trump even emphasized that &#34;we cannot just focus on the stock market&#34;—which is completely contrary to his long-standing support for the U.S. stock market hitting new highs.
The recent series of tariff policies announced by Trump, who is returning to the presidency for a second term, has severely impacted the confidence index of U.S. businesses and consumers, significantly raising consumer inflation expectations and recession expectations. This has made global institutions and individual investors increasingly cautious about investing in the U.S. market. Since February, when the new U.S. government led by Trump fully focused on tariff policies, a growing scale of global funds has been fleeing the U.S. stock market.
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The market had eagerly anticipated that the so-called &#34;Trump put options&#34; would significantly boost the underperforming U.S. stock market this year. However, Trump and U.S. Treasury Secretary Mnuchin have recently not revealed any supportive or reassuring stance towards the U.S. stock market, but instead emphasized that as the U.S. economy becomes less dependent on government spending, the U.S. economy may inevitably experience a &#34;detox&#34; period.
Trump himself stated that the U.S. economy will have a &#34;transition period,&#34; and the &#34;disturbance&#34; brought about by tariffs is inevitable, emphasizing that tariffs are meant to make America strong again and &#34;Make America Great Again.&#34; Last week, Trump once again downplayed market concerns about a U.S. economic recession and predicted that the U.S. would not fall into recession. He said at the White House, &#34;I don't see any signs of a recession. I believe this country will prosper.&#34; Trump also added, &#34;You can't just keep your eyes on the stock market; it will go up and down. But you know what? We have to rebuild our country.&#34;
In response, investors began to withdraw from U.S. risk assets and heavily sold off the best-performing tech giant stocks in this long-term bull market that started in October 2022 to realize profits. At the same time, the enormous uncertainty brought by the Trump administration, especially the immense pressure on the macroeconomic level, has led investors to remain cautious rather than choosing to &#34;buy on dips&#34; as they usually do.
Over the past decade, investors have repeatedly learned one thing from their investment experience: choosing to &#34;buy on dips&#34; when large tech stocks experience pullbacks usually yields substantial investment returns. Even during the long-term downturn in 2022 when the Nasdaq Composite Index plummeted over 33%, it ultimately proved to present multiple excellent buying opportunities, with severely undervalued stocks like Meta Platforms reaching new historical highs in the following two years.
&#34;The AI investment frenzy in China&#34; is sweeping the globe! Moreover, tech giants from the East are valued much lower.
However, as the widespread global trade war initiated by U.S. President Trump raises concerns about &#34;stagflation&#34; in the U.S. economy and even fears of a deep recession, these buying opportunities and the broader global investors' hesitation to &#34;buy on dips&#34; in U.S. stocks have increasingly found a new investment direction with advantageous valuations, strong fundamentals, and comparable strength in artificial intelligence: the Chinese stock market.
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For a long time, the investment community has almost unanimously believed that the U.S. tech giants remain the highest quality companies globally, possessing market dominance, astonishing profitability, and ample cash reserves. But the question now is whether these advantages have already been reflected in current stock prices? And given that current valuations are much higher compared to the historic crash period in 2022, especially when the U.S. economic growth slows, corporate investments in artificial intelligence may not meet expectations, and the Chinese tech giants with more advantageous valuations and strong profit potential have risen strongly this year, whether these advantages are facing threats.
For the Chinese stock market—namely the Hong Kong and A-share markets, the groundbreaking &#34;ultra-low-cost AI large model&#34; launched by DeepSeek is driving large models to begin deeply penetrating various industries in China, along with Alibaba's strong performance and the ambitious &#34;super blueprint for artificial intelligence&#34; that Alibaba has demonstrated.
It has become an unprecedented &#34;bull market catalyst&#34; for global investors to reassess Chinese assets, while these investors had already been concerned about the increasingly high valuations of U.S. tech stocks.
With the comprehensive rise of the Chinese artificial intelligence startup DeepSeek, leading a new &#34;AI large model computing paradigm&#34; centered on &#34;ultra-low cost&#34; and &#34;high efficiency&#34; comparable to OpenAI, DeepSeek has begun to deeply integrate with various industries such as healthcare, finance, and education, as well as AI innovative products/services brought by applications like consumer electronics. This is expected to drive new growth paradigms in sales and operating profits across China's semiconductor, SaaS software, cloud computing, and all industries, ultimately boosting global investors' bullish enthusiasm for the Chinese stock market, especially tech stocks. Looking at the investment returns of global hedge funds so far this year, the secret or magic formula for outperforming peers or benchmark indices since 2025 seems to be one principle: allocating to Chinese tech stocks.
The &#34;Ten Giants of Chinese Technology&#34; (i.e., Ternific 10) which includes Alibaba, Tencent, Meituan, Xiaomi, BYD, JD.com, NetEase, Baidu, Geely, and SMIC, have seen their stock prices perform far better than the &#34;Seven Giants&#34; that led the U.S. stock market into a long-term bull market since 2023, driven by the domestic AI large model deployment frenzy brought by DeepSeek since February. WisdomTree Asset Management's head of equity strategy, Jeff Wenig, bluntly stated in a tweet in February that the &#34;Seven Giants&#34; of the U.S. stock market are giving way to the &#34;Ten Giants of Chinese Technology.&#34;
Wall Street's major bank, Bank of America, stated that U.S. tech stocks are overvalued and overly held compared to Chinese tech stocks. The bank expects a large-scale rotation from the $16 trillion market capitalization of the U.S. &#34;Seven Giants&#34; to the $1 trillion market capitalization of China's &#34;BATX&#34; (i.e., Baidu, Alibaba, Tencent, Xiaomi).
Since the beginning of this year, the Hang Seng Tech Index, which includes Chinese tech giants like Alibaba, Tencent, and Xiaomi, has surged over 30%, while the S&amp;P 500 Index, which has fallen nearly 5% and entered a correction zone, appears extremely weak.
From the perspective of index-level valuation, according to LSEG statistics, even after the surge since February, the 12-month expected price-to-earnings ratio of the Hong Kong Hang Seng Index is only 7x (the expected price-to-earnings ratio is a commonly used indicator for measuring stock valuation). In contrast, even in a technical correction, the expected price-to-earnings ratio of the S&amp;P 500 Index, which has a high weight of the &#34;Seven Giants,&#34; remains as high as 20x.
Société Générale's research report shows that the valuation premium of China's &#34;Seven Giants&#34; has dropped from 115% before 2021 to about 55% currently. This is still about 20 percentage points lower than the average premium over the past five years. Compared to the U.S. &#34;Seven Giants,&#34; China's &#34;Seven Giants&#34; have a greater degree of valuation discount, currently around 45%
The &#34;Seven Giants&#34; of China cited by Societe Generale — namely Tencent, Alibaba, Xiaomi, BYD, SMIC, JD.com, and NetEase.
Art Hogan, Chief Market Strategist at B. Riley Wealth, stated: “Currently, no one is willing to recklessly bottom-fish the U.S. stock market's 'Seven Giants' to catch a falling knife, as the U.S. stock market is filled with too much uncertainty, which is why we have yet to see any lasting rebound.”
Although the &#34;Seven Giants&#34; of the U.S. stock market generally exceeded expectations in the fourth quarter, Wall Street analysts have recently significantly lowered their earnings forecasts for these giants in 2025. The main logic is that the &#34;tariff war&#34; initiated by Trump will drive costs significantly higher, affecting profits in the global market. According to Bloomberg Intelligence's forecast data, the expected profit growth rate for the U.S. stock market's &#34;Seven Giants&#34; has dropped from 24% in mid-January to around 20% for 2025, while the overall profit growth rate for the Seven Giants in 2024 is as high as 34%. In contrast, the expected overall profit growth rate for S&amp;P 500 constituents this year is 12%, up from 10% last year.
From the recent dynamics of the &#34;Seven Giants&#34; in the U.S. stock market, each company's situation varies. For example, Tesla has always been an exception; it has the smallest scale among the Seven Giants, the lowest profit margin, but the highest valuation, mainly due to investors' high attention to CEO Elon Musk. Despite a 48% drop in Tesla's stock price over the past three months, its valuation remains as high as 82 times expected profits.
Apple, with the second-highest valuation, appears more conservative, currently valued at 29 times expected profits, but still near historical highs, and analysts have significantly lowered Apple's fundamental outlook due to a sharp decline in sales in the Chinese market and cost surges caused by tariffs. Among the &#34;Seven Giants,&#34; Alphabet has the lowest valuation, around 18x. Nevertheless, even Alphabet's current valuation is still far above the lows seen during the crash in 2022.
Bullish investors also have their arguments. The 14-day Relative Strength Index (RSI, a technical indicator measuring momentum) of the &#34;Seven Giants&#34; index (i.e., Bloomberg Mag 7 index), which measures overall trends, recently fell below 24, the lowest point since 2019, and well below the typical oversold level of 30. Although it has since rebounded to 36, it remains far below the 70 mark that indicates &#34;overbought.&#34;
Todorova from Leverage Shares stated that despite the sell-off, the fundamental reasons supporting large tech stocks have not changed significantly, and it may just be a matter of time before investors return to this sector. She said: “The current situation is more about the macro and geopolitical environment rather than a sharp deterioration in these companies' fundamentals. In the coming months, we will have a clearer understanding of the Federal Reserve's monetary policy plans and the state of U.S. economic growth. If the market begins to recover at that time, I believe the 'Seven Giants' will once again outperform the broader U.S. stock market
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The valuations of US tech giants have hit a new low in several months, but traders have not chosen to "buy the dip." In the market sell-off, Wall Street is taking a cautious stance on the "seven giants" of US stocks and is turning to Chinese tech stocks. Despite a significant decline in valuations, they have not yet reached the lows of 2018 and 2022, and market uncertainty is increasing. The Nasdaq index has fallen for consecutive days, indicating that the "buy the dip" strategy has not been effective

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Are the "Seven Giants" of the US stock market no longer being bottom-fished? Bargain hunters choose to side with "East Rising, West Falling"