Nvidia’s (NASDAQ:NVDA) exceptional earnings report marks the conclusion of another headline-grabbing season for the “Magnificent 7” tech stocks, reaffirming their significant influence amid this year’s unprecedented market rally.
In the first quarter, Nvidia reported a remarkable fivefold increase in overall revenue, surpassing $26 billion, alongside a substantial surge in net income, totaling $15.24 billion. Collectively, the Magnificent 7 tech stocks, including Microsoft, Apple, Alphabet, Amazon, Meta Platforms, and Tesla, amassed a staggering $108.9 billion in earnings during the same period, reflecting a more than 50% surge from the previous year. This growth far outpaces the 5.5% collective earnings increase for the entire S&P 500 index.
JP Morgan strategists noted that Q1 marked the fifth consecutive quarter where the remaining 493 S&P500 constituents exhibited negative year-on-year earnings growth, underscoring the outsized contribution of the Magnificent 7 stocks. These tech giants have driven over half of the S&P 500’s year-to-date returns, despite comprising only around 31% of the index’s total weight.
Nvidia, in particular, has been a significant driver, accounting for nearly a quarter of the S&P 500’s returns with its impressive year-to-date surge of approximately 115%. The dominance of the Magnificent 7 has widened the gap between the S&P 500 and its equal-weighted counterpart, signaling the substantial influence of Big Tech on market performance.
Bank of America’s monthly survey of global fund managers revealed that more than half of respondents identified “long Magnificent 7” stocks as the market’s most crowded trade, surpassing concerns about the US dollar or China equities.
Looking ahead, tech is poised to maintain its grip on market performance, with the communications services and information technology sectors projected to contribute over half of the S&P 500’s second-quarter earnings. However, some analysts anticipate a shift in dominance towards other sectors in the latter part of the year, driven by broader fundamental improvements.
Despite recent outperformance by energy, materials, and utility sectors, AI-related technologies remain a focal point, with companies supporting electricity generation for cloud computing and EVs experiencing prosperity. As the market enters a period of oscillation, Navellier Calculated Investing suggests that energy stocks may emerge as top performers in June, highlighting the evolving dynamics of market leadership.
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