The importance of the Magnificent Seven stocks to the market in 2024 is well documented, but 2025 has seen mixed results so far with a tough first quarter and more recent rally.
This week will bring some key insights into the biggest of the big tech firms, with four sets of earnings results released over the coming days. Tesla and Alphabet have already reported and Nvidia is not due until May 28, so this week belongs to Microsoft and Meta (both reporting after the market close Wednesday) and Amazon and Apple (after the market close Thursday).
With Elon Musk having been ‘away on government business’ which has left Tesla without a full-time CEO and led to a backlash against the EV maker, its performance was always set to disappoint. It posted its worst quarter in years last week and prompted a promise to return to the day job for its billionaire leader.
At Alphabet, the Google search operation was a key driver of first quarter revenue and profit, with earnings per share beating expectations by 80 cents (at $2.81). The strong performance of its search business was key to justifying the firm’s heavy investment in AI which is powering the next generation of internet searching.
For the remainder of the Magnificent 7 – and bearing in mind the group’s worst start to a year since 2022 despite last week’s rally – there is high anticipation, but for some the shining brilliance of these tech stocks is already in question.
“From Magnificent to Maleficent, it’s just become a massive challenge,” Matt Orton, head of market strategy at Raymond James Investment Management told the WSJ, referencing the villain in the “Sleeping Beauty” fairy tale. “Some of the shine has been lost with respect to the story. It was only a matter of time.”
And with valuations under scrutiny, the four earnings results this week are critical to maintain momentum from last week’s stronger market performance.
“Any modicum of a weaker than expected number is going to cause a further selloff because of the concern around tariffs,” Phil Blancato, chief market strategist at Osaic Wealth told Bloomberg.
With most still suggesting that the trajectory for big tech is still upwards, investors may decide to buy any dip that comes from this week’s results. And it seems many Americans are keen to ensure that their retirement plan has exposure to the Nasdaq-100 index that they so heavily influence.
The newly released results of a survey of 1000 adults by boutique investment firm Shelton Capital Management found that close to 80% of 401(k) plan participants believe it is important to include a Nasdaq-100 product in their investment options, with around 20% considering it extremely important.
Almost half (45%) already have a Nasdaq-100 product in their portfolios and 40% of 401(k) plan participants say a long-term, superior track record attracts them most to the Nasdaq-100.
Citing BrightScope Beacon data, the firm says that allocation to Nasdaq-100 Index mutual funds makes up less than 1% of all 401(k) assets.
"From 1994 through the end of 2024, the S&P 500 returned over 2000%, while the Nasdaq returned over 6000%,” noted Shelton CEO Steve Rogers. “This was a great risk/return trade-off for the additional volatility. For investors comfortable with the additional risk inside of their 401(k) account, owning funds tied to this benchmark was a great way to build wealth."
Perhaps this week’s earnings reports will prompt investors to adjust allocations, one way or another.
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