專家「聯」綫：美股七巨頭之回歸（只提供英文版本）

Megacycle Artificial intelligence (AI) once again dominating the US market
AI-related business models have delivered high profit growth to date
Concerns about a valuation bubble in the tech sector are exaggerated
Stock selection is crucial – differentiation in the software sector through AI

The "Magnificent 7" are dominating the US stock market with strong earnings growth, particularly thanks to their involvement in AI. This is not a valuation bubble. Investors should nevertheless pay attention to stock selection and focus on providers with high barriers to entry, particularly in the software sector.

The "Magnificent 7" are back on the US stock market – and how! The current reporting season clearly shows how strongly earnings momentum depends on a select number of companies. According to estimates, the profits of the “glorious” stock market group rose by 22 percent in the second quarter, while profit growth in the broad US S&P 500 index was around nine percent. Although this is the highest figure since the beginning of 2023, it is not enough to contribute to a significantly broader market. As a result, the equally weighted S&P 500 Equal Weight Index is currently about three percentage points behind the S&P 500 Index, which is much more heavily weighted toward individual heavyweights (as of August 15, 2025).

Some significantly better figures
As in the previous year, the price momentum on the US stock market is thus driven by a manageable number of companies. These primarily include technology and platform companies that are classified in a narrower circle than the "Glorious Seven", i.e. Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. While Tesla has some special features and is not venturing any forecasts, the picture elsewhere looks much more optimistic. Meta, the parent company of Facebook, and Microsoft, for example, have exceeded expectations by a wide margin. Stock market traders also reacted positively to the presentation of Alphabet and Apple's quarterly figures, with shares gaining significantly in value as a result. By contrast, Amazon's figures were disappointing because its cloud business (Amazon Web Services, AWS) grew much less strongly than expected and compared with its competitors. Chip manufacturer Nvidia has not yet reported and will not present its figures until 27 August. However, Nvidia shares have already regained around 50 per cent of their value following a period of acute weakness in the wake of the DeepSeek "shock" at the end of January. At the end of January, Chinese start-up DeepSeek unveiled its AI model, which was considered particularly cost-effective and efficient compared to its Western competitors.

Competitive pressure from China easing again
Concerns that China could overtake the US in the race for AI applications have recently subsided significantly. According to media reports, DeepSeek is now apparently experiencing problems with AI training using Huawei chips. This is good news for US chip manufacturers such as Nvidia and AMD, and also explains in part the positive share price performance in recent months. The two companies are also benefiting from the fact that they are once again allowed to export (scaled-down) semiconductor chips to China. The high-performance chips produced by the two companies, which are essential for AI applications, are a product that is receiving particular attention in the power struggle between the US and China. The US authorities would be very unhappy if these chips could be exported to China without controls.

The current reporting season shows that AI remains a key profit driver in the technology and software sector, with both positive and negative effects depending on the business model. Contrary to previous fears, however, demand for AI services is not slowing down. The high investment figures for (AI) data centres for the current year have been confirmed or, in the case of Alphabet, increased by around ten billion US dollars to 85 billion US dollars. Meta's investment plans are also at the upper end of the forecast range and are set to rise further next year. Demand for computing capacity for AI applications remains very high.

Strong earnings growth among the Magnificent 7 is driving the S&P 500 ...
... but earnings momentum is set to converge

Source: BofA Securities, Bloomberg, Union Investment. As at 14 August 2025.

Three winners, two average performers, two losers ...

Source: BofA Securities, Bloomberg, Union Investment. As of 14 August 2025.

No bubble formation

Despite the positive fundamental trends, the question arises once again as to whether AI is a "bubble" on the stock market. We believe that, unlike the internet bubble a quarter of a century ago, there is no widespread bubble formation. At that time, business models with little or no profitability were traded on the stock market at sometimes astronomical valuations. However, the business models of the "Mag 7" generate high cash flows and earnings, and the high investments can also be written off much more quickly under the new US tax system ("Big Beautiful Bill"), which has a positive impact on profits. Currently, valuations are still unremarkable, or at least not extreme. Due to the overall high earnings growth, AI-related companies understandably command a premium over the overall market, but with price-earnings ratios in the range of 20 to 30 for next year, there is no sign of a massive valuation expansion.

In our view, the structural growth trend in AI remains intact, even if earnings could be somewhat more volatile in the future due to shifts in competition. Apple, for example, has announced that it will invest more heavily in robotics and voice control as a latecomer to the AI business. In our view, potential regulatory risks exist at Alphabet, where the issue of cannibalisation of traditional internet search by applications such as ChatGPT is still on the table. Due to the greater uncertainty about future revenue growth, careful stock selection is advisable. We see further opportunities in particular in semiconductor stocks with AI exposure.

Take a differentiated view of the software sector

As with semiconductor stocks, those stocks in the software sector that have a strong link to AI infrastructure, such as Palantir, Cloudflare, Microsoft and Oracle, are currently in high demand on the stock market. On the other hand, software-as-a-service application providers are being viewed critically, as it is unclear whether AI could have a major disruptive effect in the medium to long term. There are fears that database or computing applications, for example, could be directly replaced by AI. This is also the reason why software providers such as Adobe, Salesforce and SAP have recently seen their share prices fall. However, investors should not lump all stocks together here : Providers such as Oracle and SAP have high barriers to entry thanks to their control over their customers' data and, in our view, are therefore well positioned to withstand the AI competition; in the medium term, they should even be able to benefit from a broader market thanks to AI.

Source: Union Investment. All information, explanations and illustrations are as at 18 August 2025, unless otherwise stated