3rd Quarter 2025

The "IT" Stocks

October 13, 2025

Every era has its obsession. Hollywood has the “It Girl.” Wall Street has the “IT Stocks.” Today, the Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, Meta) command attention and drive markets. Where they lead, the S&P 500 follows.

Through September 30, 2025, the Mag 7 returned 18.8% YTD, outpacing the S&P 500 at 14.5% and the equalweight S&P 500 (the average stock) at 9.9%. Together they now make up a record 35% of the index’s market cap. Never before has the market been more top-heavy. And history tells us: narrow leadership often comes before corrections.

Turn on financial news most mornings, and odds are you’ll hear about one (or all) of the Mag 7. Their popularity is built on the promise of artificial intelligence, but just as the “It Girl” fades when the fashion changes, markets have a way of humbling yesterday’s darlings.

Warning Signs

Concentration isn’t the only concern; growth stock indices are outperforming value indices. As Jeff Weniger (using Refinitiv data) illustrates, the S&P 500 Growth to Value has spiked to levels last seen in December 1980, March 2000, and August 2020. None of those periods ended quietly.

Valuations, by many measures, have also climbed to historic highs. Consider Japan’s extraordinary 1980s bull market. Its industrial giants, the keiretsus, once embodied unstoppable growth. But when innovation slowed, expectations outpaced reality. The Nikkei peaked in 1989 and it has yet to recover three decades later.

Today’s AI-fueled economic optimism has echoes of those past bubbles. The race to build data centers and power plants bears an eerie resemblance to the capital frenzies of the Industrial Revolution, the Roaring Twenties, and the dot-com boom. Increased fixed costs, uncertain adoption, and looming technological shifts such as quantum computing, could all test the durability of this story.

Fade the Fad

When the dot-com bubble burst in 2000, skeptical investors ignored the hype (remember “price-to-eyeballs” valuation measures?) and stayed focused on fundamentals. They didn’t panic because they knew that equities The Long & Short of It 2 R&W compound wealth over the long term. Since 1926, the S&P 500 has delivered a 10.4% annualized total return despite wars, recessions, and bubbles.

And let’s not forget: no investor has ever gone broke by taking a profit. If you own some of the Mag 7 stocks that have ballooned with AI enthusiasm, it may make sense to lock in a portion of those gains and reduce the size of your wager. Consider redeploying profits into high-quality companies trading at attractive valuations, or into diversifiers such as precious metals and long-term Treasuries. These assets could help preserve purchasing power when markets stumble.

Our Approach

At Robinson Value Management, we focus on large-cap value stocks—industry leaders with clean balance sheets, purchased when undervalued and out of favor. These companies have the resilience to weather economic storms. They innovate internally by acquiring promising smaller firms and scale those innovations through their own distribution networks. Over full cycles, this discipline has delivered steady compounding and superior risk-adjusted returns, often shining brightest after growth bubbles deflate.

For nearly three decades, we’ve studied macro cycles, policy shifts, and investor behavior. Our priority is longterm purchasing power, not short-term price movements. That’s why we reject cookie-cutter “balanced” portfolios built on intermediate bonds. Instead, we combine value equity discipline with thoughtful exposure to true flight-to-safety assets.

If you’d like to learn more about our perspective and how we help investors fade the fad, we’d welcome the conversation.