The so-called "Magnificent 7" tech stocks -- comprised of Nvidia (NVDA) -), Apple (AAPL) -), Tesla (TSLA) -), Microsoft (MSFT) -), Amazon (AMZN) -), Google (GOOG) -) and Meta (META) -) -- were performing well until recently. In the earlier part of the year, this group of tech stocks, powered by excitement and demand over artificial intelligence, pushed the markets to strong highs.
But after driving the bulk of the S&P's gains, the month of August has seen this group deliver around 50% of the S&P's losses, in a combined total loss of $632 billion.
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Apple, Microsoft, Meta and Tesla are all down significantly for the month. Even Nvidia, which is up almost 200% for the year, has not come through August unscathed.
But Nvidia is reporting earnings on Wednesday, and for some analysts the moment could change the recently negative tune coming from the Magnificent 7 sector.
"This is one of the most important earnings weeks of the year with the 'Godfather of AI' Nvidia set to report," Wedbush analyst Dan Ives said. "The Street is laser-focused on Nvidia's guidance and Jensen's commentary to get more direction on the true demand and growth trajectory of the AI revolution."
Ives, who remains "bullish" on Nvidia, said that Wedbush's anticipated strong outlook from the company will help reignite a tech rally through the rest of the year.
This is one of the most important earnings weeks of the year with the "Godfather of AI" CEO Jensen Huang and Nvidia reporting its highly anticipated earnings on Wed after the bell. We expect a bullish outlook from Nvidia that speaks to unprecedented AI demand in the field. 🐂🔥
— Dan Ives (@DivesTech) August 21, 2023
Brad Erickson, a senior analyst at RBC Capital Markets, agrees that Nvidia's coming earnings represent an opportunity for a "lift," for investors with AI exposure. But he told CNBC that it's hard to make a definitive call on whether a strong report from Nvidia could lift these tech leaders out of their current slump.
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"There's three components of AI. There's the chips, the cloud vendors, then there's the application layer," he said. "The first two are pretty well understood. Turns out a lot of people haven't figured out quite what we can do with AI yet on the application side. So I don't know that there will be follow-through from that perspective."
Erickson said that the recent slide in the Magnificent 7 is due to several factors, notably the recent weakening in China's retail sales.
"Meta's a great example," he said. "We think over 10% of their sales is actually coming from China. And so people are baking in that weakness."
Erickson is confident, however, that for the tech giants in the group who do well when the consumer is doing well, a non-Nvidia-related lift is coming.
"As we head into the Fall timeframe, you'll get into stronger consumer heading into the holiday," he said. "But I think at the moment there's this late summer malaise."
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