Bank of America strategist Michael Hartnett blames the DeepSeek-driven AI battle and waning federal spending
The man who coined the term “Magnificent Seven,” which refers to seven high-performing tech stocks — Alphabet $GOOGL (GOOGL), Amazon $AMZN (AMZN), Apple $AAPL (AAPL), Nvidia $NVDA (NVDA), Microsoft $MSFT (MSFT), Meta $META (META), and Tesla $TSLA (TSLA) — now believes its golden era is about to end, and that’s due to the AI battle driven by DeepSeek.
Read here: Which stocks are in the Magnificent 7?
The arrival of DeepSeek, a Chinese artificial intelligence startup that has developed AI models comparable to those of OpenAI but apparently at a fraction of the cost and energy, has caused turmoil in the stock market, leading to a significant sell-off in the tech sector. In his note, Hartnett indicated that spending on artificial intelligence is expected to reach its peak soon.
“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.”
Beyond AI, Hartnett sees other key drivers of U.S. market outperformance—such as excess fiscal support and immigration—waning this year. He doubts U.S. stocks will continue to outpace global markets, citing an expected slowdown in government spending and tighter immigration policies.
Fiscal spending has been high in recent years, but President Trump is now pushing for extensive cuts, even creating the Department of Government Efficiency (DOGE), now led by Tesla CEO Elon Musk.
Hartnett has advised investors to seek cheaper international markets instead of pursuing overpriced U.S. stocks. He noted that equities from Brazil, Germany, the UK, and Canada have provided higher returns than Wall Street’s S&P 500-listed stocks.
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