This article first appeared on GuruFocus.
The Magnificent Seven are heading into earnings season in a very different spot this time, and it feels like investors are starting to rethink how they want to play it.
The group is no longer moving in one direction. Microsoft (NASDAQ:MSFT) is down about 13.6% this year and Tesla (NASDAQ:TSLA) is off roughly 12.7%, while Nvidia (NASDAQ:NVDA), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOG) are still sitting on solid gains. At the same time, the broader market has held up better than many expected, with the S&P 500 dropping 9% from its January high and then bouncing back 12% from its March low, largely thanks to big tech. Earnings growth for the index is still expected around 13.2% YoY, so expectations are not exactly low.
What is starting to shift is how investors react. After a strong run, there is a sense that any disappointment could be punished quickly, but at the same time, some are looking at weaker names as opportunities. With AI spending from companies like Microsoft, Amazon, Alphabet, and Meta expected to top $650 billion this year, the long term story is still strong, but questions around margins, capex, and execution are becoming harder to ignore.
