Six of the seven Magnificent Stocks have reported, and judging by investors’ reactions, it’s open season for pruning some very large, tall poppies.
In fact, while Friday’s slump grabbed most of the attention, the tech sector (excluding a big one-off in Intel) has been under increasing fire for about three weeks as more and more investors question where the returns are for AI (or as one website quipped Friday, “ROI, AI, Now!”).
Intel lost 31% of its value on Friday after a weak update and news of big cuts. It had been losing ground for most of the year, but Friday’s plunge was staggering.
Only Nvidia is left to report later this month—August 28—and even if its figures are impressive, investors’ loss of confidence in the AI story has gone too far for the chip giant to rescue sentiment, let alone return it to the boom track of June and early July.
So let’s see how the Big Seven fared at Friday’s close.
Apple was on top—in the green for the week—up 0.7% for the day and 1.17% for the week, with a market value of more than US$4.4 trillion and an 18.4% gain year-to-date. It still has to weather the market’s response to the launch of its AI products called Apple Intelligence later this year.
The sale of half of its holding by Warren Buffett’s Berkshire Hathaway will likely hit the Apple share price for a while.
Microsoft disappointed with lower-than-expected growth in its cloud business, and even talk of big spending plans for AI couldn’t help, although its other businesses performed solidly. The shares lost 2% on Friday and 5.3% for the week, barely hanging onto its US$3 trillion valuation at US$3.05 trillion.
Nvidia shares fell 1.8% for the day on Friday and 5.7% for the week. Its market value has tumbled to US$2.83 trillion. Seven weeks ago, it was briefly the most valuable company with a value of US$3.3 trillion.
Alphabet shares fell 2.35% for the day and 1.23% for the week, sending its market value down to US$2.07 trillion. Amazon also took a bath, losing more than 8% on Friday alone and 8.64% for the week. It ended Friday with a value of US$1.77 trillion.
Meta shares performed best of all, gaining 3.8% for the week after a 1.9% drop Friday, leaving its market value at US$1.18 trillion.
Bringing up the rear is the laggard and poorly run Tesla, down 4.4% and 7.7% for the week, with a market value of nearly US$651 billion. And it looks set to fall further as poor news from the EV sector keeps rolling in and Elon Musk remains distracted by other matters.
Netflix is a distant star to the six megas and Tesla. It reported in mid-July and performed much better than expected. The shares lost 1.7% on Friday and 3% over the week. Its market value was nearly US$265 billion.
Finally, Berkshire Hathaway’s shares ended Friday with a loss of 0.8% for the day and 2.2% for the week. Its market value finished at nearly US$938 billion. It reported its June quarter figures on the weekend, and tonight we’ll see the investors’ response.
These companies are now so large in their sectors that their results (including Netflix and especially Berkshire Hathaway) are also significant economic indicators.
Josh Koren, founder of Musketeer Capital Partners, told CNBC that these tech giants with trillion-dollar-plus valuations are increasingly a macroeconomic play because they’re so big that softness in the overall data is naturally going to show up in their results.
“As the economy slows down, a business like Amazon, like Apple, they’re going to slow down as well,” Koren said on Friday. “That’s what you’re seeing in the earnings.”
And that implies that over time these mega-giants will struggle to grow faster than the wider economy.