For most of the past decade, a handful of tech giants have driven the U.S. stock market to historic highs and become the cornerstone of investment portfolios, but this trend has collapsed this year.
Although the S&amp;P 500 index rebounded in 2025 after being hit hard by President Trump's erratic trade policies, tech giants like Apple (AAPL.US), Alphabet (GOOGL.US), Amazon (AMZN.US), and Tesla (TSLA.US) are still declining. The Bloomberg Fabulous Seven Index—which includes these companies as well as Meta (META.US), Microsoft (MSFT.US), and Nvidia (NVDA.US)—has underperformed the S&amp;P 500 index, and if this continues until December 31, it will mark the second year in the past decade that this has occurred.
This is a stark contrast to last year when both tech and telecom stocks rose over 35%, leading the S&amp;P 500's 23% increase. This year, sectors that typically lag behind, such as industrials, utilities, and financials, are instead driving the stock market rebound. Whether large tech companies can regain their historical dominance in 2025 is a life-or-death question for tech stock investors as they begin to prepare for the second half of this year.
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Rick Gardner, Chief Investment Officer at RGA Investments, stated, &#34;The market is starting to focus more on individual stocks, companies, financial strength, and innovation, rather than letting the uncertainty surrounding tariffs and their potential direction truly dominate the discussion. If you want to start talking about the U.S. economy, you want to start talking about tech; it's a very bright story.&#34;
In the past month, as the market rebounded, Gardner has been buying large tech stocks for his clients, but these stocks have remained sluggish.
Gardner is not alone. There are signs that after significant cuts to stock positions due to the economic uncertainty triggered by Trump's global trade war, more professional traders are beginning to return to the stock market. For example, according to data from Goldman Sachs' prime brokerage division, hedge funds rushed to buy U.S. stocks at the fastest pace since April 9 on Tuesday. After Trump announced a delay in tariff imposition, the S&amp;P 500 index soared 9.5%. Tech stocks were the biggest beneficiaries of the buying spree.
<h2>Multiple Headwinds for Tech Giants Remain</h2>
The flip side of this optimism is that tech stocks have surged significantly over the past few years, and as the economy continues to change, the risk for these stocks is that there may be greater downside potential. Ten years ago, betting on large tech stocks yielded a return of 2,179%, while the S&amp;P 500 index's return, excluding dividends, was 181%.
Lisa Shalett, Chief Investment Officer at Morgan Stanley, stated in an interview on Friday, &#34;I think we will stagnate here. It's hard to justify these numbers.&#34;
Hedge fund manager Michael Burry is known for betting on the real estate market in the &#34;Big Short&#34; in 2008. According to the latest 13F regulatory filing from his company Scion Asset Management, he purchased put options on Nvidia in the first quarter to profit from a price decline. However, the filing also noted that these securities &#34;may be used to hedge long positions that do not meet reporting requirements.&#34;
That said, the biggest &#34;what if&#34; question in the stock market is: What would it mean for the S&amp;P 500 index if those lagging large tech stocks start to outperform again? The &#34;Magnificent Seven&#34; accounts for about one-third of the S&amp;P 500 index's market value and has fallen 4.2% this year, while the S&amp;P 500 index has risen 1.3%. So, if the large tech stock index reverses its trend and rises first, how much will the S&amp;P 500 index increase?
Gardner said, &#34;I think it's possible to hit a new all-time high. I don't want to be the one who is bearish on our tech industry and innovation right now.&#34; He seems to have a point, as tech stocks have been leading since the S&amp;P 500 index bottomed in April, with tech stocks up 31% and the overall index up 20%.
Of course, not all large tech stocks have performed poorly this year. Meta Platforms is up 9.4%, leading the seven major tech giants, while Microsoft is up 7.8%. Both companies have limited exposure to tariffs and reported better-than-expected earnings. Nvidia is set to release its earnings report on May 28, with the company's expectations for 2025 roughly flat.
Nevertheless, betting on tech stocks to rise carries its own risks. Trump may restore his tough stance on tariffs after the 90-day suspension period ends in July. Additionally, it remains to be seen whether the demand shock from Trump's tariffs will disrupt the U.S. economic expansion and lead to a resurgence of inflation.
So far, companies have absorbed most of the costs associated with Trump's tariffs, but Walmart (WMT.US) indicated in its earnings report last week that consumers will soon start seeing higher prices as the company clears inventory and begins to pass on the costs of new goods. Meanwhile, the monthly survey from the University of Michigan shows that U.S. consumer confidence is at its second-lowest level on record, with inflation expectations at multi-decade highs.
While the factors dragging down large tech laggards vary, most face a common challenge of exposure to China, where the Trump administration imposed the highest tariffs. For example, according to collected data, most of Apple's most important device, the iPhone, is still primarily manufactured in China, which accounts for 17% of its revenue in 2024. The company announced earlier this month that its sales in China fell 2% in the second fiscal quarter, below analysts' expectations. Since closing at a record price on December 26 last year, Apple's market value has lost more than $700 billion and is now worth less than Microsoft and Nvidia.
At the same time, Alphabet is also facing increasing concerns that AI chatbots like OpenAI's ChatGPT could pose risks to its Google search business. An Apple executive testified in court last week that search volume for Apple's Safari web browser declined for the first time in April
However, the hopes of stock investors still exist. George Maris, Chief Investment Officer and Global Head of Equities at Signia Asset Management, stated that one of the most encouraging signs for the stock market is the S&amp;P 500's ability to rebound without being led by large technology companies.
He said, &#34;A good, constructive market doesn't necessarily need the largest securities by market capitalization to perform well. If there is more participation across the investment landscape, you may have a healthier, more robust, and more fundamentally-driven market.&#34;

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The appeal of technology stocks is waning, and investors are beginning to restructure their investment strategies. Over the past decade, tech giants have driven the rise of U.S. stocks, but this year the situation has reversed, with technology stocks performing poorly. Despite the rebound of the S&P 500 index, tech companies such as Apple, Alphabet, Amazon, and Tesla are still declining. The market is focusing on individual stocks and financial strength, and professional traders are gradually returning to the stock market. The Chief Investment Officer of RGA Investments stated that technology remains an important component of the U.S. economy

- Over the past decade, a few tech giants have driven the U.S. stock market to record highs, but this trend has collapsed in 2025.  
- Despite a recovery in the S&P 500, major tech companies like Apple, Alphabet, Amazon, and Tesla are experiencing declines, with the "Magnificent Seven" index lagging behind the S&P 500.  
- The future of these tech stocks remains uncertain, as they face challenges from tariffs and economic shifts, while other sectors are currently leading the market rebound.

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The "de-mystification" of tech stocks may usher in a new era for the U.S. stock market as institutions urgently restructure their investment paradigms