Deepwater TechFlow message: On July 14, U.S. small- and mid-cap stocks are finally shaking off years of sluggish performance, delivering the best returns in more than 20 years, as investors begin rotating out of high-growth tech giants and into stocks with lower valuations that have benefited from the AI investment boom. So far this year, the U.S. small-cap benchmark Russell 2000 Index is up 20%, and is on track to deliver its best performance since 2003, while S&P 500 blue chips have risen 10%. The so-called “Magnificent Seven” tech stocks are up less than 3%.