The “Magnificent Seven” group consisting of Tesla TSLA, NVIDIA NVDA, Alphabet GOOGL, Microsoft MSFT, Amazon AMZN, Apple AAPL and Meta META is showing signs of a rebound lately as evident from 3.3% uptick on March 24, 2025. The group was heavily beaten-down over the past month. The MAGS ETF is down 5.5% in that timeframe (as of March 24, 2025).

"Although President Trump’s announcement of 25% tariffs on all foreign-made vehicles kept the investing world on edge on March 26, 2025, the underlying tech momentum remains strong. In a nutshell, tech stocks can gain winning momentum but remain clouded by tariff concerns.

Once investors get clarity on trade tensions and Fed moves, U.S. tech stocks should stage a surge. A strong business moat, and a perception of uniqueness are key strengths of the space.

Let’s delve deeper.

What Caused the Past Month Slump?

The “Magnificent Seven” went through an upheaval, with the coming of DeepSeek-style artificial intelligence. DeepSeek, a Chinese startup developing AI models, revealed in late January that training the R1 model cost just $5.6 million, significantly less than the $100 million required to train OpenAI's GPT-4 model.

On the other hand, Alibaba BABA introduced the QwQ-32B model, an AI system that rivals DeepSeek but requires only a fraction of the data. Such advancements triggered doubts that the huge capital investments deployed by U.S. tech majors to develop AI technologies will generate the expected returns at all, causing MAGS ETF to underperform.

Is the Tide Turning for Mag-7 Now?

Note that due to the DeppSeek-style threat, Trump tariffs and uncertain future Fed policy, tech stocks have taken a beating this year. But then, big tech valuations have come down, too, this year. Moreover, any significant AI breakthrough is likely to trickle down to Mag-7 stocks sooner or later.

Rosenblatt analysts see potential gains for tech giants Meta, Apple and Amazon, despite the DeepSeek breakthrough, as quoted on investing.com. Meta could benefit by integrating DeepSeek’s advances into Llama. Apple may leverage China’s AI progress to enhance localized features.

Meanwhile, Amazon recently announced a $100 billion investment in AI infrastructure for 2025, with one-fourth allocated to e-commerce operations. While focusing on cost-cutting in recent years, Amazon continues to expand its data center infrastructure.

Decline of Treasury Bond Yields  

The Trump Administration has been advocating for lower interest rates for months. Agreed, the Fed operates independently. But trump tariffs may cause an economic slowdown, which in turn may prompt the Fed to keep rates lower.

Will the Rise of DeepSeek Usher in a New AI Era?

Some analysts believe the market's reaction to the U.S. tech biggies was probably exaggerated.Bernstein’s Stacy Rasgon downplayed the DeepSeekfears in January. He added that innovations like DeepSeek’s model could help free up compute capacity, which would ultimately drive further growth in AI infrastructure, as quoted on Yahoo Finance.

Futurum’s chief strategist, Daniel Newman, said that a more efficient model like DeepSeek will increase AI usage, citing an economics concept called the Jevons Paradox, as quoted on Yahoo Finance.

The Jevons paradox states that increased efficiency in using a resource can result in increased consumption of that resource. Microsoft CEO Satya Nadella highlighted the same concept in a tweet, noting that greater AI efficiency would likely lead to skyrocketing usage.

Microsoft CEO Satya Nadella, too, highlighted the same concept in a tweet, noting that greater AI efficiency would likely lead to skyrocketing usage, which in turn would benefit the broader AI industry (read: DeepSeek AI Fears Overrated? ETFs in Focus).

Earnings Prospect

For Q1, Tech sector earnings are expected to be +12.7% from the same period last year on +10.0% higher revenues, the 7^th quarter in a row of double-digit earnings growth. Q1 earnings for the Magnificent 7 group of companies are expected to be +13.9% from the same period last year on +11.9% higher revenues. 

ETFs in Focus

Against this backdrop, below we highlight a few Mag-7-heavy exchange-traded funds (ETFs). These ETFs include MAGS, MicroSectors FANG+ ETN FNGS, Vanguard Mega Cap Growth ETF MGK, Invesco S&P 500 Top 50 ETF XLG and iShares S&P 100 ETF OEF.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Tesla, Inc. (TSLA) : Free Stock Analysis Report

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report

Invesco S&P 500 Top 50 ETF (XLG): ETF Research Reports

Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports

iShares S&P 100 ETF (OEF): ETF Research Reports

MicroSectors FANG+ ETN (FNGS): ETF Research Reports

Meta Platforms, Inc. (META) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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