Three companies, namely Nvidia, Meta, and Amazon, have emerged as the driving forces behind the ‘Magnificent 7’ trade. These three companies have outperformed the S&P 500 index, with Nvidia leading the trio with a surge of nearly 60% compared to the benchmark index’s 6% increase. In contrast, Apple, Alphabet, and Tesla have experienced losses in value during the first two months of 2024.
The strong performance of these companies is largely attributed to their earnings results. Nvidia, in particular, exceeded expectations in the current earnings season. Meta announced plans for a $50 billion share repurchase program and its first-ever dividend. Amazon also surprised with positive revenue metrics.
Over the past 30 days, as analysts analyzed the latest corporate results, Meta, Amazon, and Nvidia saw the largest increases in earnings projections for both the current year and next year. On the other hand, Tesla and Microsoft were the only two companies in the group to experience negative earnings shifts for next year.
The quarterly results of these companies are expected to have a significant impact on the overall market. Analysts have revised their earnings per share estimates for big tech companies in 2024, leading to an upward revision of the S&P 500 year-end target. This positive outlook for big tech companies has contributed to the expectation of a higher S&P 500 index by the end of the year.
According to DataTrek co-founder Jessica Rabe, the superior earnings estimate momentum of US big tech companies compared to the broader market explains their continued outperformance. As long as these companies continue to deliver strong earnings results, they are likely to drive the S&P 500 higher.
In conclusion, Nvidia, Meta, and Amazon have emerged as the key drivers of the ‘Magnificent 7’ trade, outperforming their peers and contributing to the positive outlook for big tech companies in the market.
