A historic opportunity to bottom fish the tech giants of the US stock market? Retail investors flock to ETFs tracking the "Seven Giants" during the plunge

According to the Zhitong Finance APP, data released on Wednesday regarding capital flows in the U.S. stock market shows that during the recent continuous decline in the U.S. stock market, retail investors have been aggressively buying a popular exchange-traded fund (ETF) that tracks the performance of the "Magnificent Seven" tech giants.

According to the latest statistics from market analysis firm VettaFi, the "Roundhill Magnificent Seven ETF" (ETF code: MAGS), which tracks the overall price movements of the "Seven Giants" in the U.S. stock market, attracted a net inflow of up to $50 million over the past four trading days ending Tuesday. During the same period, the MAGS ETF's trading price fell by more than 7%, while the S&P 500 index dropped by 4.6%.

Statistics indicate that this significant net inflow of retail funds ended the previous five weeks of net outflows for this ETF. This popular ETF, with an asset size of $1.68 billion, had seen a cumulative net outflow of approximately $163 million over the past five weeks. Since the beginning of this year, the ETF's trading price has cumulatively dropped by more than 12%. The ETF primarily covers major stocks including NVIDIA (NVDA.US), Alphabet (GOOGL.US), and Apple (AAPL.US), tracking the overall stock price movements of the seven tech giants that hold significant weight in the S&P 500 index and the Nasdaq Composite index.

The so-called "Magnificent Seven" tech giants, which hold significant weight in the S&P 500 index and the Nasdaq 100 index, include: Apple, Microsoft, Alphabet, Tesla, NVIDIA, Amazon, and Meta Platforms (the parent company of Facebook), and they are the core driving force behind the S&P 500 index's record highs.

Looking at the entire U.S. stock market, the seven tech giants have been the leading force since 2023, attracting global capital with their incredibly strong revenue driven by AI investments, solid fundamentals, consistently strong free cash flow reserves over the years, and expanding stock buyback programs.

However, since the beginning of this year, especially after the emergence of DeepSeek-R1, the logic behind the seven giants leading the U.S. stock market has fundamentally changed. The stock price performance of these tech giants has significantly underperformed the S&P 500 index, becoming the core negative catalyst dragging down the entire U.S. stock market. Investors have begun to strongly question whether the AI spending plans of the U.S. tech giants, which have been fervent over the past two years, are reasonable. On Monday, the combined market value of the "Magnificent Seven" tech giants, which hold significant weight in the S&P 500 index and the Nasdaq index, evaporated by over $830 billion, setting a record for the highest single-day market value loss for the seven giants.

The "low-cost AI shockwave" brought by DeepSeek has been continuously pressuring the valuations of large tech stocks such as NVIDIA, Microsoft, and Alphabet. Additionally, as the stock prices and valuations of these tech giants have surged significantly over the past two years, coupled with the unclear path of AI monetization in the U.S., the "expectation of excess AI computing power in the U.S." driven by DeepSeek has continued to ferment. Furthermore, the epoch-making "ultra-low-cost AI large model" launched by DeepSeek has become an unprecedented "bull market catalyst" for global investors to reassess Chinese assets, especially the Chinese stock market (including Hong Kong stocks and A-shares), at a time when these investors were already concerned about the soaring valuations of U.S. tech stocks.

Todd Sohn, a market strategist from Strategas, stated: "For these tech giants, this is the first significant downward adjustment in a long time. For retail investors who still prefer to concentrate their investments in these tech giants, ETFs like this provide a quick way to complete their position layout and track the overall stock price trends of the seven giants, rather than focusing on individual large tech stocks, which to some extent avoids the severe volatility brought by individual stocks."

According to statistics from Vanda Research, retail investors have been the largest buying force for this ETF recently. In the week ending Tuesday, retail buying accounted for about 25% of the total buying volume of the ETF. Todd Sohn also pointed out: "Even though the stock price performances of these companies are becoming increasingly divergent, retail investors are still willing to purchase this ETF that bundles the 'seven giants' together."

As of Wednesday's market close, the stock price of Tesla (TSLA.US), one of the seven giants, has fallen by 38% since the beginning of the year, while Meta Platforms (META.US), the parent company of Facebook, has been the best-performing tech giant among the seven this year, with its stock price rising nearly 6% in 2025, mainly due to the market's optimism about Meta's strong potential for "AI revenue" and "AI monetization" in the global AI era, given its 3 billion user base.

The stock price of global electric vehicle leader Tesla once exceeded $1.5 trillion in market value after Trump was re-elected as U.S. president, but its market value has since shrunk by nearly $700 billion.

Vanda's research report also pointed out that retail investors who tend to increase their allocation to tech stocks usually prefer ETF products that track a broader range of tech companies. For example, the Invesco QQQ ETF (QQQ.US), which tracks the Nasdaq 100 Index (.NDX), and the Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL.US), which aims to track three times the leveraged returns of the NYSE Semiconductor Index According to statistics from Vanda, during the recent significant decline in the U.S. stock market, these popular technology-focused ETF products also saw active buying from retail investors