70% of the Stock Market Gains this Year Come from the Magnificent Seven

Following a recent sell-off in the wider market, the benchmark S&P 500 saw a significant rebound over the past week, driven by a generally strong Q3 earnings season. As a result, the dominance of the ‘Magnificent Seven’ firms increased even further, now representing nearly 70% of S&P 500’s gains in 2023. 

S&P 500 Rebounds as Magnificent Seven Companies, Excluding Tesla, Post Strong Earnings

Earlier this year, the Tokenist reported on how the seven biggest tech giants listed in the US, also known as “The Magnificent Seven,” accounted for more than 50% of the S&P 500 gains in 2023 amid the ongoing AI boom.

Following a series of positive earnings results over the past few weeks, the stock prices of companies witnessed a fresh boost, taking that number to almost 70%, according to Morningstar analysts. 

“Six of the Magnificent Seven have reported earnings, and they’ve been decidedly mixed,” he says. “Amazon, Meta, and Microsoft each reported better-than-expected results, hitting on all cylinders, and provided the market with a strong outlook. For these stocks, we increased our fair value estimates by 3% on average.”

– said David Sekera, Morningstar’s chief US strategist.

Tesla (NASDAQ: $TSLA) was the only company that failed to impress with its latest quarterly report, with the electric vehicle (EV) maker missing earnings and revenue estimates and posting a sharp drop in total operating margins. 

Google owner Alphabet (NASDAQ: $GOOGL) beat estimates for earnings and revenue for its fiscal third quarter but witnessed a sharp stock price drop anyway as investors expected more from the company’s cloud and AI operations. Nevertheless, positive corporate numbers in the broader market drove the S&P 500 5% higher over the past week.

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Nvidia’s Q3 Earnings Expectations

Meanwhile, the only Magnificent Seven company that hasn’t reported its latest earnings yet is Nvidia (NASDAQ: $NVDA), with the chipmaker set to reveal its results on November 21.

Following two monster reports this year, the AI and chip giant is estimated to report earnings per share (EPS) of $3.16 in the current quarter on revenue of $15.19 billion, per Yahoo Finance data. Meeting those numbers would mark a significant increase compared to the year-ago quarter when Nvidia posted adjusted EPS of $1.17 on revenue of $7.1 billion. 

“Expectations are exceedingly high for growth in its artificial intelligence business, and depending on its results, the stock could be in for a wild ride.”

– Sekera added.

The company’s shares soared roughly 215% in 2023 thanks to its vital role in the ongoing tech sector craze marked by generative AI solutions like ChatGPT. Last week, reports revealed that Nvidia may be forced to cancel $5 billion worth of AI chip orders to China due to recent export controls imposed by the US government. 

Do you think the recent surge in the S&P 500 was a temporary relief rally? Let us know in the comments below.