It may be time for investors to look outside the U.S. for stronger returns, Bank of America warned clients. Strategist Michael Hartnett remarked in his weekly “Flow Show” note that “U.S. exceptionalism [is] peaking,” noting that “tailwinds of excess U.S. fiscal spend, immigration, AI capex bubble fading.” Indeed, the artificial intelligence bull narrative took a huge hit this week with the emergence of Chinese AI startup DeepSeek — which was able to produce a large language model for less than $6 million. That’s a fraction of the billions of dollars U.S. companies are paying to develop their AI capabilities. The news put AI darling Nvidia down more than 12% for the week through Thursday’s close. That would mark its biggest weekly slide since September. The tech-heavy Nasdaq Composite is also down more than 1% week to date. Hartnett isn’t the only one warning of faltering American exceptionalism in markets. Earlier this week, Societe Generale’s Manish Kabra noted that the DeepSeek news was ” shaking investor confidence in the broader complex, primarily as the alleged low cost of the DeepSeek model calls into question the need for the same type of spending/investing moving forward.” Against this backdrop, BofA’s Hartnett noted that investors are “missing new secular bulls in cheap, unloved Japan & Europe banks (areas where value outperforming growth stocks); note Japan banks still 74% below 1980s highs, EU banks 67% below 2007 highs (Chart 5), and both breaking with upside likely in our view.” Japan’s Nikkei 225 is flat to start the year, but is up 9% over the past 12 months. The Stoxx 600, which tracks an array of European stocks, has outperformed in early 2025, rising 6.5%. It’s also up 11% over the past year. Elsewhere Friday morning on Wall Street, analysts reacted positively to Apple ‘s latest quarterly figures, with several of them hiking their price targets on the stock. “China demand was not as bad as feared given holiday price discounting and share loss headlines. Critically, AAPL comments indicating the initial regions where iPhone AI features have been rolled out are outperforming other geos should support sentiment on the stock,” wrote TD Cowen’s Krish Sankar, who raised his 12-month price target to $290 from $250, implying upside of about 22%.
