Is it the end of the “Magnificent 7” on Wall Street?

Is it the End of the Tech Giants’ Rule on Wall Street?

In these tumultuous days on the stock market, the “Big 7” no longer dominate the profits of Wall Street.
Is this the beginning of the end of the power of the tech titans? This legitimate question has been haunting investors in recent weeks, as concerns have emerged about the overvaluation of some tech giants that have fueled euphoria so far.
The trading day of August 5 risks becoming symbolic of a downfall, with the losses in the stocks of the 7 market kings about to wipe out $1 trillion of value.

The Rise and the Fall

The enthusiasm for the astonishing novelty of Artificial Intelligence became more evident at the end of 2022, a year that began with the Ukraine war.
Selected stocks began to show signs of life, propelling the “Magnificent Seven” – the group comprising Meta, Amazon, Microsoft, Alphabet, Apple, Tesla, and the chip manufacturer Nvidia – to the forefront on Wall Street.
The rally continued in 2023, with the share prices of these companies increasing on average by 111% throughout the year.
Nvidia, in particular, saw a remarkable growth of 240% between January and December.

However, in recent weeks, these stocks have started to experience spectacular sell-offs.
Disappointing quarterly results, overvaluation, global economic uncertainty, and skepticism about the immediate AI-driven profit return have dimmed the light on the “Magnificent 7”.

The Decline

The stocks of the Magnificent 7 experienced their worst daily drop since the launch of ChatGPT on July 31st, sliding over 10% in the two weeks from July 10th to 24th.
This marked the first time in over a year and a half that they firmly entered correction territory, collectively losing over $1.7 trillion in market capitalization.
The session on August 5th started as a nightmare at Wall Street, with Nvidia plummeting 9%, Apple losing 8%, and the Nasdaq trading deep in the red.

The catalyst for this sell-off seems to have been the quarterly results of some of these companies, according to analysts.
Tesla and Alphabet were among the first to report, with Tesla’s profit dropping by 40%, leading to a more than 12% fall in its stock.
Alphabet exceeded profit and sales growth expectations, but weaker-than-expected YouTube advertising revenue indicated that aggressive AI investments might take longer to pay off.

Nvidia also faced significant losses, shedding over 20% from its all-time high in recent weeks, entering bear market territory.

The Federal Reserve’s Role

This stock market turbulence underscores the role of the US Federal Reserve.
After delaying interest rate cuts for most of the year due to inflation and a relatively resilient economy, the situation is now changing.
The Fed is expected to reduce interest rates in September, with traders estimating a near 100% probability of a rate cut.

In conclusion, the fate of the “Magnificent 7” remains uncertain, as investors navigate through market volatility, economic indicators, and the Fed’s monetary policy decisions.
The future of these tech giants on Wall Street hangs in the balance, with potential shifts in investor sentiment and broader market trends shaping their destiny.