Artificial intelligence and Magnificent 7: a ticking time bomb for investors?
Artificial intelligence and the Magnificent 7 - the seven biggest tech companies in the world - are back. And if you look closely, you will see that the list is growing. Why are they so dominant? And what are the opportunities as well as the risks for investors? Mark Van Assche, account manager Private Banking and Wealth Office talks about it with Heng-Ta Quach, portfolio manager at KBC Asset Management.
29/10/2025
Economy
- Weakening job growth and shrinking savings surpluses, along with inflation remaining high due to higher import tariffs, are weighing on US consumers' purchasing power. Our economists do not anticipate a recession, and in fact have slightly upgraded their growth forecasts for 2025 and 2026 - though the rate of growth is admittedly slightly lower than in recent years. Overall, therefore, we are still looking at a slowdown in growth.
- Our economists still believe economic growth in Europe will be low.
Commodity prices - inflation
- With energy prices under control and declining wage growth, inflation rates are continuing to fall almost everywhere. Inflation in the euro area is already within the central banks' 'comfort zone'. In the US, however, core inflation remains somewhat higher and the rising import duties are having a noticeable effect on output prices.
- With a number of key trade agreements in place, the new average import tariff is estimated at 16-17% (compared to 2.5% before Trump II). These levies are expected to gradually trickle down into retail prices in the coming months, keeping inflation above the Federal Reserve's target for several more months.
Fiscal and monetary policy
- The 'Big Beautiful Bill', which mainly extends the expiring tax cuts from Trump's previous term, is expected to provide a limited boost to growth. The shutdown in the US seems to be resolved for now.
- China continues to regularly support its flagging economy with new policy measures. In the euro area, the major investments announced for defence and infrastructure are gradually taking more concrete shape, although it looks as if their impact won’t be felt fully until 2026-27.
- The European Central Bank kept its deposit rate unchanged at 2% in July, with further movements dependent on economic data. Our economists do not expect the Bank to cut interest rates further next year.
- The Fed cut rates again, but warned that a December cut is not a given. This surprised the market, which after a while capitulated on the absence of further cuts this year.
Bond markets
- Despite weaker growth, falling inflation and lower key rates, bond yields remain at somewhat higher levels in both the US and Europe.
- The fiscal about-turn by the new German government, lifting the ‘debt brake’ and allocating a generous budget to relaunch policy and defence spending, explains the higher yields in Europe.
- The -once again- volatile political situation in France caused interest rates to rise a little further.
- In recent weeks, interest rates have normalised and stabilised somewhat.
Stock markets
- The stock markets have climbed again to historic highs in recent weeks.
- For now the market doesn’t seem to price in another rate cut this year, which causes some volatility after the end of the US government shutdown.
- The result season is still in full swing. If we look at big tech, AI and accompanying investments are still the name of the game with mixed feelings from investors. Not all companies have reported yet, we keep following developments in the season closely.
Risks
- On the financial markets, the conflicts in the Middle East and Ukraine have somewhat taken a back seat in recent weeks, but there is nothing to prevent them from flaring up again.
- The political situation in France remains suboptimal, while government departments in the US are going into shutdown.
- Concerns about Trump's tariff policy have arisen in recent weeks, as well as about private lending following a number of bankruptcies.
- The markets are less concerned about these developments for the time being, but sentiment could turn quickly.
Euphoria after the end of the shutdown was confronted with a capitulation of the market about the absence of a further rate cut this year.
Siegfried Top, Senior Strategist at KBC Asset Management
This web page is published by KBC Asset Management NV (KBC AM). The information and figures it contains are a snapshot, may be changed without notice and offer no guarantee for the future. The information provided should not be regarded as investment advice or as an investment recommendation. No part of this page may be reproduced without the prior express written consent of KBC AM. The information on it is governed by the laws of Belgium and is subject to the exclusive jurisdiction of its courts. Publisher: KBC Group NV, 2 Havenlaan, 1080 Brussels, Belgium. VAT BE 0403.227.515, RLP Brussels. www.kbcbrussels.be.
