Big Tech’s Reign May Falter in 2025, Says Morgan Stanley
On January 2, investor caution deepened as Big Tech giants faced scrutiny, pushing analysts to highlight diversification and the growth potential of emerging sectors like AI, renewable energy, and healthcare.
As of early January 2025, investor sentiment towards Megacap tech stocks is signaling a maturing market, with analysts stressing diversification, warning against overreliance on past winners. With AI, renewable energy and healthcare as pivotal sectors, the focus now centers on company-specific resilience and their growth for a more balanced and sustainable market dynamic.
Investors Cautious on Big Tech Giants
Investor sentiment is already showing signs of cautious shift, with the Bloomberg Magnificent Seven Total Return Index falling for four straight sessions – longest losing streak since 2022. Analysts highlighted how traders are more likely to become selective in buying Megacap tech stocks in 2025, differentiating between companies based on factors, such as exposure to AI, antitrust risks and currency swings.
“We are getting to a part of the cycle where differences in individual company exposures are really going to make a difference,” said Lisa Shalett is the Chief Investment Officer (CIO) of Morgan Stanley Wealth Management.
Wall Street analysts, such as Savita Subramanian of Bank of America, also echo such concerns, warning their clients to spread their portfolio. In fact, other firms such as Goldman Sachs and Citigroup also advise going out of technology giants for fresh avenues of growth.
More Realistic Outlook
Lisa Shalett emphasized setting “appropriate expectations” from this new market phase, primarily for those investors who had hugely relied on the continuous stellar performance of Big Tech. Shalett also told investors not to get too confident in the same areas where enthusiasm has been the most robust, “These may also be the very areas where there are significant disappointments.
What we have to watch out for is where some of the disappointments may be, Shalett said, adding that investors need to become even more discriminating. Attention will increasingly focus on company specific analysis of relative strengths and weaknesses, including, for example, how well they have adapted to the changing market and can sustain growth in the much more competitive environment.
The growth that typified Big Tech is now cooling, and 2025 might just be the inflection point of the market. In 2025, accredited investors will likely have to be more strategically diversified, instead of depending on the same old handful of technology leaders to drive overall gains.
“The key is going to be picking stocks,” said Shalett, in what sounded very much like a call for a far more subtle approach to investment.
All this may eventually lead to a far more constructive, stable market, where success will come not from just a few names of Big Tech giants but from across broad participation.
Inside Telecom provides you with an extensive list of content covering all aspects of the tech industry. Keep an eye on our Tech sections to stay informed and up-to-date with our daily articles.