Over the first two months of 2025, equity markets have seen a significant shift in leadership. The US market – for so long the driving force behind index-level returns from global equities – has tailed off, with European markets (so far) in the ascendency. It is impossible to say how long this change in market leadership might last, however.
The not-so-Magnificent Seven?
The group of large US technology companies collectively known as the ‘Magnificent Seven’ has experienced a sharp correction since mid-December. Although these companies – Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla – are so often lumped together, on a fundamental basis they are quite different businesses and the stock price divergence between them reflects that. For example, Meta has posted gains of around 20% in the early part of 2025, while Tesla has plummeted by nearly 40%.
Is now the time to question whether the narrative behind the Magnificent Seven is falling apart? In the Jupiter Systematic Equities team, we would argue that rather than blindly following the idea that investing in just seven companies provides easy exposure to as large and diverse sector as technology, we believe it's crucial to analyse each company individually, assess the opportunities they represent, and take investment decisions accordingly.
Where is the real AI revolution happening?
Our view is that the real opportunities lie in identifying which companies — beyond the headlines of the Magnificent Seven — are actually achieving efficiencies within their business models by applying AI technologies. For example, consider how banks are becoming more efficient in customer service through the use of chatbots, while pharmaceutical companies leverage emerging AI technology to accelerate drug discovery.
This is where we see significant opportunities when evaluating the thousands of companies available to investors in global markets—those that can integrate these technologies to enhance their profits, regardless of their industry. Of course, this certainly doesn’t mean ignoring the technology sector, indeed the most important question to ask when looking at the major tech firms is how they will be able to monetise the astronomical investments they are making and will continue to make.
That’s the key issue, especially as smaller companies are emerging in this space. Just a few weeks ago, Deepseek was making headlines because of its seemingly highly effective solution delivered at significantly lower investment. We have also seen Mistral, a French startup, launch Le Chat — another smaller competitor to the likes of OpenAI’s ChatGPT — which leverages innovative techniques to achieve results similar to Deepseek’s. These emerging solutions could enhance global competitiveness and reshape the landscape of AI investment. All of this raises some uncertainty about how the US megacaps have structured their approach to AI development, and perhaps that is one of the factors contributing to the decline in the Magnificent Seven so far this year.
The long and the short of it
In the Jupiter Systematic Equities team, one of the strategies we run is a market-neutral long/short equity strategy. In this, our current net exposure to the tech sector is close to zero. Naturally we do hold some tech stocks in the long book, as undoubtedly there are exciting opportunities out there, but those are roughly balanced out by short positions in tech companies we believe are overpriced and have downside potential.
This demonstrates that, rather than take a broad macro approach and saying either “let’s invest in tech companies” or “tech stocks look like a bubble”, we focus on detailed analysis via our systematic investment framework, evaluating thousands of companies to identify opportunities for both long and short positions.
Strategy risks
- Investment risk: Whilst the strategy aims to deliver above zero performance irrespective of market conditions, there can be no guarantee this aim will be achieved. Furthermore, the strategy may exceed its volatility limit. A capital loss of some or all of the amount invested may occur.
- Company shares (i.e. equities) risk: The value of shares (i.e. equities) and similar investments may go down as well as up in response to the performance of individual companies and can be affected by daily stock market movements and general market conditions. Other influential factors include political, economic news, company earnings and significant corporate events.
- Currency risk: The strategy can be exposed to different currencies and may use techniques to try to reduce the effects of changes in the exchange rate between the currency of the underlying investments and the base currency of the strategy. These techniques may not eliminate all the currency risk. The portfolio value may rise and fall as a result of exchange rate movements.
- Derivative risk: The Investment Manager uses derivatives to generate returns and/or to reduce costs and the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment. Derivatives also involve counterparty risk where the institutions acting as counterparty to derivatives may not meet their contractual obligations.
- Stock connect risk: The strategy may invest in China A-Shares through the China-Hong Kong Stock Connect (“Stock Connect”). Stock Connect is governed by regulations which are untested and subject to change. Trading limitations and restrictions on foreign ownership may constrain the manager’s ability to pursue the investment strategy.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important Information
This document is issued by Jupiter Asset Management (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission (“SFC”). You are advised to exercise caution. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. The value of investments and the income from them can fall as well as rise and may be affected by exchange rate variations, you may get back less than originally invested. Past performance is no guide to the future. For your security we may record or monitor all telephone calls. This document is for information only and is not an offer to sell or an invitation to buy. In particular, it does not constitute an offer or solicitation in any jurisdiction where it is unlawful or where the person making the offer or solicitation is not qualified to do so or the recipient may not lawfully receive any such offer or solicitation. Any holdings and stock examples are used for illustrative purposes only and should not be viewed as investment advice. The views expressed are those of the presenter at the time of preparation and may change in the future. It is the responsibility of any person in possession of this document to inform themselves, and to observe, all applicable laws and regulations of relevant jurisdictions. The information and any opinions contained herein have been obtained from or are based on sources which are believed to be reliable, but the accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss from this information. www.jupiteram.com has not been approved by the SFC. Jupiter Asset Management is the Trade Name of Jupiter Asset Management (Hong Kong) Limited.