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Tech Stocks Surge as Tariff Fears Subside: Magnificent Seven Adds $1.5 Trillion in Value
Shares of the “Magnificent Seven” tech stocks experienced a significant surge on Wednesday, collectively gaining over $1.5 trillion in market capitalization. This impressive rebound followed President Trump’s decision to temporarily halt his proposed sweeping tariffs for 90 days. The tariff pause provided relief to major technology companies, which had recently faced downward pressure due to concerns about escalating trade tensions and their impact on global operations and artificial intelligence (AI) investments.
Market Rebound After Tariff Relief
Despite Wednesday’s substantial gains, the “Magnificent Seven” are still recovering from recent losses. These companies have collectively lost $3.4 trillion in market value since their peak in late 2024. Notably, approximately $2 trillion of these losses occurred in the week prior to the rebound, triggered by President Trump’s imposition of tariffs on imports from several nations, including China, a key market and exporter for technology sector.
However, the announced tariff reprieve instilled renewed optimism among investors, prompting them to reinvest in these high-growth stocks. The valuations of these tech giants had previously reached record highs, fueled by massive investments in building artificial intelligence infrastructure, making them sensitive to macroeconomic uncertainties like trade disputes.
AI Investments and Strategic Planning Resume
Michael Ashley Schulman, chief investment officer at Running Point Capital, commented on the situation. He stated, “The pause ideally provides corporate financial officers and chief operating officers the opportunity to reassess and continue with AI expansion initiatives. These plans may have been previously delayed due to trade uncertainties, especially considering the potential tariff risks associated with importing AI chips and specialized hardware, for instance, from Taiwan or South Korea.” Running Point Capital has investments in the Magnificent Seven stocks through various funds and client portfolios.
Schulman further emphasized, “The ambitious AI endeavors of Big Tech companies require substantial capital expenditure, international talent acquisition, and intricate global hardware supply chains.”
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He also noted that clear tariff policies are crucial for eliminating ambiguity in financial planning. While this temporary suspension permits corporations to resume strategic planning, he cautioned that the long-term outlook remains uncertain.
Magnificent Seven Stocks Lead Market Rally
Shares of key companies within the Magnificent Seven – including AI chip manufacturer Nvidia, Apple, Tesla, Microsoft, Alphabet, Meta (parent company of Facebook), and Amazon – demonstrated strong performance, with closing gains ranging from 9% to 23%. This robust performance propelled a broader market rally, driving the Nasdaq Composite up by more than 12%.
Beyond market volatility, the imposed tariffs had cast a shadow over corporate spending on AI-driven tools and services offered by these technology giants. Wall Street analysts will be closely examining budgets and expenditures when companies commence reporting their quarterly earnings later this month.
Continued Investment in Data Centers
Despite previous concerns, Alphabet reiterated on Wednesday its commitment to invest around $75 billion in expanding its data center capacity this year. Similarly, Microsoft has affirmed its intention to invest over $80 billion in developing its data center infrastructure.
“These investment levels are guided by both immediate and anticipated long-term demand trends,” Microsoft stated in a recent announcement.
Tariff Policy Shifts
President Trump announced on Wednesday a temporary 90-day pause on several new tariffs, even while increasing tariffs on imports from China. This abrupt shift in policy occurred less than 24 hours after substantial new tariffs had taken effect on imports from numerous trading partners.
He specified an increase in tariffs on Chinese imports to 125% from the previous 104% rate that became effective at midnight. Concurrently, he indicated a reduction in tariffs for other nations also impacted by the new targeted duties.