The seven leading technology giants, often referred to as the “Magnificent Seven,” which have been the driving force behind this year’s impressive US stock rally, are now grappling with disappointing earnings. This downturn has collectively led to a staggering $200 billion decrease in their market value, posing a significant threat to the stability of the S&P 500 index.
Among the notable casualties, Alphabet Inc., the parent company of Google, Tesla Inc., and Meta Platforms Inc., the parent company of Facebook, have all experienced significant declines in their stock prices following their respective earnings reports. The only outlier in this scenario is Microsoft Corp., which has managed to maintain its positive momentum.
The tech behemoth, Amazon.com Inc., is set to disclose its earnings after the market close on Thursday. The options market is hinting at a potential one-day movement of 8.1% in either direction for Amazon’s stock, which translates to approximately $100 billion in market value at stake.
The remaining two companies, Apple Inc. and Nvidia Corp., are slated to release their earnings reports next month, further adding to the suspense surrounding the tech sector.
These seven companies have undeniably been the focal point of this year’s stock market narrative, with a surge of interest in artificial intelligence driving many of their gains. However, this once-unwavering optimism has been dampened by the combination of rising interest rates and geopolitical tensions in the Middle East. This has led to an 8.8% drop from the S&P 500’s peak in 2023, bringing it perilously close to the 10% threshold that defines a correction in a bull market.
Despite this, there is still a prevailing sense of enthusiasm. The Nasdaq 100 Index, heavily influenced by the Magnificent Seven, continues to boast a remarkable 31% increase for the year, despite the disappointing earnings, leaving room for potential market fluctuations.
Meta Platforms Inc.’s latest results are anticipated to exert a significant influence on the market when trading resumes on Thursday. In premarket trading, the social media giant experienced a 2.4% drop, disappointing investors with a less-than-optimistic outlook on the potential for a sustained advertising recovery, citing an unpredictable economic landscape as a key factor.
Recent developments have seen Alphabet grapple with a substantial setback, shedding nearly $180 billion in market value on Wednesday. This plunge was primarily attributed to the underperformance of the company’s cloud division, which reported profits below expectations. This marks the most significant single-session market value loss in the history of the search giant. Tesla, too, experienced a swift decline earlier this month, with its value plummeting by a staggering $72 billion in a single day following its earnings report.
At present, the sole glimmer of hope within the illustrious lineup of tech giants is Microsoft. The software giant, renowned for its Windows operating system, witnessed an impressive rally, adding approximately $75 billion in market value on Wednesday, courtesy of better-than-anticipated first-quarter results.
Both Alphabet and Microsoft, although trailing Amazon in cloud infrastructure, have been fiercely competing to bolster their AI offerings, aiming to enhance the allure of their platforms to consumers. Their divergent performance sets a high bar for Amazon, the leader in cloud computing, as it prepares to unveil its earnings report on Thursday.
The disappointing earnings across the board have cast a shadow on the once-mighty Magnificent Seven, underscoring the unpredictable nature of the tech market and the imperative for these industry giants to recalibrate their strategies moving forward.
Source: Bloomberg
