Tech Titans Square Off Against S&P 493: Assessing Tech Giants' Yearly Performance
Tech Giants Suffer in 2025 amid Trump's Trade War
The tech titans, famously known as the Magnificent Seven - Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla - have been hit hard in 2025, following two years of remarkable growth. President Donald Trump's trade war has taken a heavy toll on the mega-cap stocks, driving costs higher and casting a shadow over global economic prospects.
In the sunshine years of 2023 and 2024, the Magnificent Seven soared by a collective 156%, outpacing the S&P 500 Index, which saw a 57.9% surge. But in 2025, these seven stocks have underperformed the S&P 500, which has tumbled 6.8% since January, according to Morningstar.
Returns among the Magnificent Seven range from a 6% loss for Microsoft to a 16% decline for Alphabet and a staggering 30.1% fall for Tesla. Are we to expect more turbulence for the tech giants, or will they defy the economic gloom and reclaim their former strength?
Trade War Hits Apple and Amazon
Since January 20, Trump has shaken up global trade with sweeping tariffs on US imports. Initially, tariff levels were set for a long list of countries, large and small. These announcements caused chaos in stock and bond markets, eventually leading to Trump announcing a 90-day tariff pause on April 9.
Even though technology goods like computers and smartphones are currently tariff-exempt, Trump's trade policy has stoked uncertainty among American tech titans. Apple and Amazon, sources for a significant percentage of their products from China, are especially vulnerable.
Tariffs could force both companies to either raise prices (risking a hit to demand) or absorb these additional costs as lower margins. The business relationship between Apple and China could also sour if the Chinese government retaliates against US firms, putting further pressure on Apple's sales in the region.
Tesla Struggles to Keep Up
Tesla, another member of the Magnificent Seven, is grappling with growing competition from Chinese models. The company faces challenges in a market dominated by homegrown carmakers, like BYD, which has grown rapidly over the past decade with generous public subsidies and vertical integration strategies.
However, Tesla's woes are not solely linked to Chinese competition but also the divisive nature of its outspoken CEO, Elon Musk. His controversial associations with Trump, leadership of the Department of Government Efficiency (DOGE), and support for the far-right Alternative for Germany party have turned him into a global controversy magnet. Calls to boycott Tesla motors have dented sales, causing a 37% drop across the European Union in Q1 of 2025.
DeepSeek Shakes up AI Landscape
The landscape of artificial intelligence was rocked by the launch of DeepSeek's AI chatbot R1 on the same day Trump took office. With a claimed training cost of less than $6 million using less advanced microchips, DeepSeek swiftly surpassed OpenAI's ChatGPT to become the most downloaded free app on Apple's app store in the US.
This development raised concerns among American tech investors, who offloaded Microsoft and Nvidia shares en masse. As these businesses have invested billions into developing AI hardware, DeepSeek's rapid progress has called their dominance into question.
Meta and Microsoft Gain Ground
Meta and Microsoft have both managed to maintain a relative foothold amidst the rubble, with a mere 6% loss each in 2025. Their reliance on software has increased their resilience to tariffs compared to hardware-heavy peers like Apple, Tesla, and Nvidia.
Meta shares retreated at the start of the year, owing to their expensive valuation, but cost-cutting initiatives, efforts to boost profit margins, and new AI-powered targeting tools have helped stem the bleeding. Microsoft also reported an impressive first-quarter performance, capitalizing on higher demand for cloud computing services and a spike in search and advertising revenue.
Prospects for the Magnificent Seven
Despite hopes for a softening of trade war measures, Trump's mercurial leadership style has created little clarity on the matter. The ongoing uncertainty has left businesses in the dark about future trade policies and made long-term planning nearly impossible.
However, Matt Ward, portfolio manager of technology at AXA IM, remains optimistic about the tech sector's adaptability. He suggests that the sector's impressive ability to adjust to complex supply chains provides a degree of confidence in navigate the changing course and challenges posed by the trade war.
So, will the Magnificent Seven be able to ride out the trade war storm and regain their former dominance? Only time will tell.
- Despite the trade war's impact on the Magnificent Seven's performance in 2025, some companies like Meta and Microsoft have managed to maintain a somewhat steady footing due to their reliance on software, which has increased their resilience to tariffs compared to hardware-heavy peers.
- In the midst of Trump's trade war and its far-reaching consequences, American tech titans such as Apple and Amazon are especially vulnerable due to their significant reliance on China for sourcing products, potentially forcing them to either raise prices or absorb higher costs as lower margins.
- In an unexpected turn of events, DeepSeek's AI chatbot R1, launched on the same day as Trump's inauguration in 2017, shook up the AI landscape, surpassing OpenAI's ChatGPT to become the most downloaded free app on Apple's app store in the US, and causing concerns among American tech investors about their dominance in this area.
- Investing in mortgages might provide some relief for tech-focused portfolios in 2025, as the ongoing trade war has stoked uncertainty among American tech titans, making long-term planning nearly impossible. Meanwhile, the tech industry continues to evolve, with Huawei and other emerging players posing new challenges for established giants like the Magnificent Seven.
