The dominant market position of the U.S. "Magnificent Seven" is showing cracks. In recent years, many investors adopted a simple strategy to "beat the market": heavily overweighting the largest U.S. technology stocks. While this approach yielded substantial returns, it has ceased to be effective since last year.

Revenue growth is slowing. The so-called "Magnificent Seven" refers to the leading technology companies that have driven the U.S. stock market bull run over the past three years, including Tesla, NVIDIA, Microsoft, Amazon.com, Apple, Alphabet, and Meta. These seven stocks account for approximately one-third of the S&P 500 index's market capitalization. However, over the past year, only two of these stocks—Alphabet and NVIDIA—have actually outperformed the broader market. Although the "Magnificent Seven" index rose 25% in 2025, surpassing the S&P 500's 16% gain, this was entirely due to the staggering surges in Alphabet and NVIDIA. Data shows that in 2025, the stock prices of Alphabet and NVIDIA increased by 66% and 39% respectively; excluding these two companies, the performance of the remaining members lagged behind the market.

The outlook for each company is diverging. Despite market concerns about intensifying competition and the sustainability of customer spending, NVIDIA's sales continue to grow due to demand for AI chips outstripping supply. Although Microsoft has made massive investments in artificial intelligence, its pace of profit generation is considered relatively slow. Apple's cautious approach to AI investment has provided stability, but its high stock price is also viewed as excessively expensive.

Alphabet has regained market trust by enhancing its competitiveness in AI models and developing its own chips, but analysts suggest its upside potential may be limited. Meanwhile, Meta continues to face market skepticism over its enormous AI investment expenditures. Furthermore, Tesla's stock price has surged on expectations of a pivot to autonomous driving and robotics, yet its lofty valuation is now perceived as a risk.

The core reason for the weakening market leadership lies in the narrowing profit advantage of these giants. Cited data indicates that the "Magnificent Seven" constituents are expected to see profit growth of about 18% this year, the lowest level since 2022, only slightly higher than the anticipated 13% growth for the remaining 493 companies in the S&P 500.

As profit growth slows and doubts multiply over whether massive AI expenditures will yield returns, investors are increasingly shifting their focus to other constituents within the S&P 500 index. Many Wall Street professionals anticipate this trend will persist through 2026. Year-to-date, the "Magnificent Seven" index has inched up a mere 0.5%, while the S&P 500 index has climbed 1.8%.

The rise of Asian tech stocks contrasts with the slowing growth of U.S. tech shares. As one enters 2026, Asian technology stocks have had a powerful start, with investors betting their growth momentum will last throughout the year and outperform their U.S. counterparts. Strategists at Goldman Sachs Group maintain an overweight view on Asian tech stocks, believing that surging AI-related demand and reasonable valuations will drive further gains. Citigroup stated that, given Asia's pivotal role in the global semiconductor supply chain and its earnings upside potential, global long-term investors are consistently increasing their holdings in the region's tech stocks.

Bloomberg data shows that, so far this year, the MSCI Asia Pacific Information Technology Index has outperformed the Nasdaq 100 Index by 33 percentage points and leads the Philadelphia Semiconductor Index by approximately two percentage points. Capital is accelerating its flow into Asian markets, which are at the heart of the global semiconductor supply chain. This trend also reflects another market concern: after years of excess returns, the AI-driven rally in U.S. tech stocks may be difficult to sustain. Specifically, last week, Samsung Electronics reported preliminary operating profit that more than doubled year-on-year, hitting a record high. Simultaneously, the strong stock market debuts of several Chinese artificial intelligence companies have further boosted market confidence.

Research strategists at Australian broker Pepperstone Group believe this essentially reflects a current shift in investor perception of risk versus reward. U.S. tech stocks are likened to a fully mined gold deposit, their value already extensively extracted. In contrast, Asian tech stocks resemble an underexplored mineral reserve—currently undervalued but fundamentally sound, awaiting reward for those who discover its potential first.

Bloomberg's report specifically highlighted China as a key segment for Asian tech stock investment, citing that since the beginning of 2026, market enthusiasm for Chinese technological prowess has continued to heat up. DeepSeek company published a paper outlining a more efficient method for AI development; Kuaishou's AI video tool has gained global popularity.

Concurrently, a wave of AI company listings has injected confidence into the market. Just last week, two Chinese AI firms, seen as challengers to global leaders like OpenAI, successfully listed in Hong Kong. On January 8, Chinese AI company Zhipu formally went public, becoming the "first global large-language model stock"; on January 9, Chinese AI large-model company MiniMax officially debuted on the main board of the Hong Kong Stock Exchange, closing up 109.09% on its first day, with its market capitalization climbing to HKD 106.7 billion. Meanwhile, the AI sector in both the Hong Kong and A-share markets was comprehensively ignited.

Bloomberg Intelligence predicts that in 2026, the profit growth rate of the Bloomberg China Tech Top 8 (Alibaba, Baidu, Tencent, NetEase, Pinduoduo, Xiaomi, JD.com, and Meituan) is expected to reach a major inflection point, surpassing the "Magnificent Seven" for the first time since 2022.