Billionaire investor Dan Loeb says he’s closed nearly all of his positions in the ever-so-popular “Magnificent 7” stocks.
Magnificent 7 as a group has been under immense pressure in recent weeks after the US President Donald Trump hammered dozens of countries with significant reciprocal tariffs.
Experts are concerned that the Trump administration’s new trade policies will push the economy into a recession, which hardly ever proves to be a positive for the tech titans.
Against such a macroeconomic backdrop, the founder and chief executive of “Third Point” has pulled out of the tech titans, indicating he does not expect a swift recovery in the Mag 7 in 2025.
Why did Loeb dump his Magnificent 7 holdings?
While the Magnificent 7 stocks are broadly known for a comeback, billionaire Dan Loeb has a bunch of solid reasons to consider trimming exposure to the tech giants this year.
For starters, the hedge fund manager expects uncertainty related to Trump’s recent policy moves to have lasting effects.
“I think there will be a residual concern about the capriciousness with which some of these issues have been dealt with and confidence in the rule of law, in expectations being met,” he said in a recent interview with CNBC.
Additionally, concerns of an AI slowdown could weigh on Magnificent 7 stocks moving forward as well.
Where Loeb sees a massive opportunity in 2025
As high-growth tech stocks continue to crumble under the Trump administration, the veteran investor is turning incrementally more interested in “private credit.”
Dan Loeb sees “massive” opportunities in private credit due to favourable market conditions, and plans on extending his firm’s focus to private credit as a complement to its existing strategies.
According to the billionaire hedge fund manager, private credit offers increasing chances to act as a liquidity provider during periods of heightened financial stress.
This makes private credit particularly exciting in 2025 amidst the recently brewing concerns of a recession ahead.
What else makes Mag 7 stocks unattractive this year
Magnificent 7 stocks historically trade at a high valuation. However, as economic uncertainty grows, investors are becoming more cautious about paying a premium price in 2025.
Plus, the macro uncertainty and fears of slower growth across key sectors like artificial intelligence and cloud computing are pushing investors to more defensive sectors this year, like healthcare and consumer staples, reducing demand for high-growth tech stocks.
All in all, as the White House remains adamant on sustaining unprecedented levies not just on rivals but on allies alike, the macro environment could grow into a full-blown trade war.
And that seldom proves to be a positive for the financial markets at large, much less the high-growth tech stocks.
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