Strategist who coined the Magnificent Seven warns US tech is set to lag

US big tech stocks are set to become the “Lagnificent 7” this year, Bank of America Corp’s Michael Hartnett warned, suggesting investors should buy cheap international stocks instead of chasing pricey US shares.

The strategist, who coined the popular Magnificent Seven term to refer to the handful of tech stocks that powered the S&P 500’s 70% rally since late-2022, said investors have become overexposed to US equities after they attracted record inflows in January.

Those positions are at risk as spending on artificial intelligence is set to peak, Hartnett wrote in a note. He also sees other catalysts of a US outperformance including excess fiscal support and immigration fading this year.

“US exceptionalism now exceptionally expensive, exceptionally well-owned,” the strategist wrote. “‘Magnificent 7’ becomes ‘Lagnificent 7,’ supports broadening of US and global equity and credit markets.”

Hartnett is among rare voices of caution on US stocks this year, with a majority of Wall Street strategists expecting the S&P 500 to continue its stellar run. Still, questions are rising about the dominance of the Magnificent Seven — a cohort comprising Nvidia Corp., Apple Inc., Amazon.com Inc., Alphabet Inc., Microsoft Corp., Meta Platforms Inc. and Tesla Inc.

The group briefly wobbled this month as the rapid rise to prominence of Chinese chatbot DeepSeek fanned worries that the US may lose its lead in AI innovation. At the same time, Europe’s Stoxx 600 Index — which is less reliant on tech stocks — is outperforming the US benchmark after one of its worst relative years in 2024.

Hartnett is particularly positive on European and Japanese banks, calling both sectors cheap and “unloved” at a time when global business activity is turning a corner. The Euro Stoxx Banks Index is down about 67% since a peak in 2007, while the TOPIX Banks Index is 74% below its own high in 1989.

The strategist also recommended investors position for a pickup in economic growth by taking bets on commodities, high-yield bonds, international stocks and “old-economy” sectors such as miners.

© 2025 Bloomberg

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