Isabelle Lee and Lu Wang

(Bloomberg) — For years now, way before artificial intelligence became the hot new thing on Wall Street, Daniel Mahr has been making money on stocks, courtesy of his machine-learning model.

These days, that AI-powered model is blaring relentless warnings against loading up on companies that lie at the very center of the AI boom.

Mahr’s trading program, which drives his flagship Federated Hermes fund, has been flashing negative signals on Nvidia Corp. and other technology megacaps since 2023. That’s still the case today, even after the group’s $2 trillion plunge since February draws in dip buyers on less-demanding valuations.

Mahr is a rarity by virtue of his market-beating returns in recent years — despite being underweight Big Tech — in an industry where AI-equipped strategies have a mixed track record at best.

“The decline hasn’t turned any of them into cheap companies; they’re all still fairly expensive,” said the 43-year-old money manager. “Something that we generally don’t like about a lot of them is volatility and they certainly haven’t become less volatile in the last few weeks.”

The aversion to so-called Magnificent Seven — also including Apple Inc., Microsoft Corp., Amazon.com Inc., Meta Platforms Inc., Alphabet Inc. and Tesla Inc. — hasn’t hurt Mahr.

His $1.6 billion Federated Hermes MDT All Cap Core Fund (QIACX) has returned 26% annually in the past five years, beating the Russell 3000 Index by almost 5 percentage points and putting it ahead of 98% of its peers — even as the disruptive post-pandemic market cycle has bedeviled money managers of all stripes.

Down 1.4% year-to-date, its loss is less than the broader market in the tariff-fueled upheaval.