Investor Alert: The Bull Market Is Over
There is a significant chance the bull market begun in 2022 is over.
Stocks bottomed in late-2022 due to several factors:
- The Fed’s war on inflation appeared to be working: the Fed raised rates from 0.25% to 4.50% that year resulting in the Consumer Price Index (CPI)declining from a peak of 9.1% to 6.5% by the year-end.
- Valuations had declined significantly from a post-pandemic peak of 22X forward earnings down to 15-16X forward earnings.
- Investor sentiment had reached extremes levels of bearishness with investor sentiment surveys, positioning, and cash levels reaching levels typically associated with bottoms.
While the bottom technically manifested in late-2022, it wasn’t until late 2023 that the bull market really went into hyperdrive with stocks closing down in only three months between November 2023 and January 2025.
The acceleration in share price was triggered by OpenAI introducing ChatGPT: the first of Artificial Intelligence (AI) technology to be introduced to the public on November 30, 2023. Since that time, the AI-theme has dominated investor focus as well as corporate results: AI companies have accounted for 75% of S&P 500 market gains, 80% of corporate profits, and 95% of capital expenditures
These results were concentrated in the MAG-7/ Big Tech companies, which grew from 20% of the S&P 500’s weight in early 2023 to over 35% at their peak in late 2025. Nvidia (NVDA), the single most important company for the AI-buildout (its Graphics Processing Units, or GPUs, are the processors required to run AI-software) had a market capitalization of $480 billion in late 2023. It reached $4 trillion in market cap just 16 months late in July 2025, making it the first company in history to achieve this milestone and the largest company in the world. Three months later, it became the first company to achieve $5 trillion in market cap.
NVDA was not the only Big Tech/ MAG-7 company profiting from the AI-revolution. Collectively, Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Meta (META), Amazon (AMZN), Alphabet (GOOGL) and Tesla (TSLA) grew their market capitalizations nearly THREE-fold from a low of ~$7 trillion in 2022 to ~$21 trillion in 2025.
It’s critical to note that this growth was driven, at least in part, by fundamentals. MAG-7 net income grew from $270 billion to $561 billion. These results, combined with investor enthusiasm, were what propelled the S&P 500 from 3,500 to 7,000.
The MAG-7 led this advance. In fact, if you remove the impact of these companies from the overall market (the equal weighted S&P 500 is a version of the index in which every company receives equal weighting, as opposed to the standard S&P 500 in which companies are weighted based on size), you find that stocks are up a mere 36% from early 2023.
Put simply, this bull market was driven primarily by the MAG-7. And while much of this performance was driven by actual results, it’s critical to note the impact that investor enthusiasm played, particularly in regard to the MAG-7 build out of AI-infrastructure.
As I noted earlier, MAG-7 profits roughly doubled between 2022 and 2025. However, MAG-7 share prices TRIPLED over the same period. This multiple expansion (when investors are willing to pay MORE for growth) was driven by investor enthusiasm for the potential of AI: the MAG-7 were and remain the key players engaged in the AI-infrastructure buildout.
All told, the MAG-7 have accounted for over 90% of capital expenditures in corporate America from 2023 to 2025. We are not talking about a small amount of money, either: by 2025, the MAG-7 were spending over $480 BILLION on AI-buildouts.
Ironically, this is likely what killed the bull market.
Every technological build-out cycle follows a similar pattern:
- A new technology emerges.
- Corporate America piles in, becoming increasingly aggressive with buildouts/ projections in an effort to “one up” competitors.
- The technology fails to manifest the projected financial results at the projected time and companies start to go bust.
Regarding the AI buildout, the first phase took place in late 2023 while second phase has been the primary driver of the bull market from 2023 to mid-2025. At that point, things began to get a little silly with AI companies/ the MAG-7 began to rely increasingly on circular deals to keep things moving, e.g. Microsoft (MSFT) and Nvidia (NVDA) began investing billions of dollars in their customers who would then turn around to use the money to buy services from MSFT and NVDA!
The below graphic from Bloomberg reveals just how preposterous this situation was becoming.
Circular deals are a MAJOR red flag that a particular theme is close to played out. But the real death knell for the AI trade came in the form of capital expenditures (capex) reaching the point at which the most profitable companies in history needed to issue DEBT to maintain their spending rates.
Remember, the MAG-7 collectively generate over $500 BILLION in profits per year. And yet, despite this OBSCENE amount in profits, the five largest AI hyperscalers—Alphabet, Meta, Amazon, Microsoft, and Oracle—issued approximately $121 billion in bonds in 2025 to finance AI infrastructure.
This removed the single largest buyer of stocks on the planet: the MAG-7 themselves.
When most investors think of “buyers” for stocks, they imagine hedge funds, financial institutions, and Mom/ Pop/ retail investors. However, the truth is that the single largest buyer of stocks on the planet, accounting for $1 TRILLION in purchases per year, are corporations themselves via stock buybacks.
Here again, the MAG-7 dominate. All told, these seven companies account for over a QUARTER of all corporate buybacks per year ($250 billion-$300 billion depending on the year).
In this context, the rapid growth in capex spending by MAG-7 has begun to remove one of the most critical props for this bull market: MAG-7 buybacks. By spending so much money on the AI-buildout, these firms have less money available to buy their own shares.
As a result of this, for the first time in years, MAG-7 buybacks have flatlined on a year over year basis. And I believe the market is now anticipating a decline in both buybacks… and corporate results, in the coming months.
Note, the MAG-7 have broken down badly after a six-month consolidation period.
To recap:
- The bull market begun in 2022 was primarily driven by the AI-revolution.
- The MAG-7 are the primary players in the AI-revolution, accounting for 75% of S&P 500 gains, 80% of corporate profits, and 95% of capital expenditures.
- The MAG-7 are now spending so much money on the AI-buildout that they are:
- Issuing debt to cover their expenses
- Reducing share buybacks.
- The reduction in share buybacks removes one of the key buyers of stocks: the MAG-7 themselves.
There is only one certain outcome from all of this...
The Fed will be forced to turn on the money printers to intervene in the financials markets. It's already cutting rates and printing $40 billion per month. So you can imagine what's coming when things get really ugly in the markets.
Short answer: inflation.
The time to prepare for this is NOW before it hits the markets. The smart money is already rotating into hard assets and precious metals — the sectors that have historically thrived during inflationary storms.
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Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research
