With the Federal Reserve cutting interest rates and Wall Street focusing on the huge costs of Big Tech’s AI rollout this summer, some of the so-called “Magnificent Seven” stocks became a little less beautiful.
However, this week most of those companies will report their quarterly earnings. Some experts expect growth that is either still pretty good for their size or still hard to find elsewhere.
Google’s parent company, Alphabet Inc., releases its earnings on Tuesday. Microsoft Corp. and Meta Platforms Inc., which is the parent company of Facebook, do the same on Wednesday. Apple Inc. and Amazon.com Inc. both have earnings reports on Thursday. These companies are worth a total of trillions of dollars. They report their earnings this week, which is a big one because it includes food spending and the fall of a once-dominant IT company in the race for AI.
Ido Caspi, an analyst at Global X, wrote in an email on Friday, “Overall, we expect Big Tech earnings… will display a mix of steady operational performance, AI-led revenue acceleration, and resilient advertising that signals ongoing health and innovation.”
“Even more, we expect to see more proof that generative AI is moving along its growth curve and continuing to move from being used for experiments to being widely used to make money.”
There are, however, signs that the markets don’t need the Magnificent Seven as much to make gains. Small investors were also showing signs that their excitement about AI was waning.
This month, MarketWatch reported that investors moved their money away from Big Tech stocks and into real estate, utilities, and financials stocks. They did this because they thought that a Fed interest rate cut would ease the pressure on other companies. Still uneasy are thoughts of a “AI bubble” and how the technology will affect the U.S. power systems. Other people have talked about whether the current AI products are useful or just filling the internet with fake, hallucinated content.
Chief Investment Officer at Siebert, Mark Malek, said this month in an interview that there were still some gains left in the tank.
“I know a lot of well-known asset guys have come out and said, ‘We’re not buying anymore,'” he said. “The numbers are still not bad, though.” Where else can you find that kind of growth potential when you compare it to everything else?
Analysts still think that Alphabet (GOOG) will make a profit growth of more than 10% per share, Meta (META) will make a profit growth of 0.46%, and Amazon (AMZN) will make a profit growth of 0.80%. Even though Microsoft MSFT0.12% and Apple AAPL 0.89% are only expected to gain a small amount, that is still more than the 3.6% gain FactSet predicts for the S&P 500 companies as a whole.
Besides talking about AI in general, he also mentioned things that were special to the company that should be watched. For Alphabet, he said he would be keeping an eye on Gemini, a Google AI assistant, to see what was going on and how they could make money from it. He also said he would be keeping an eye on the normal things, like sales from ads, YouTube, and cloud services. He said that Meta faces similar questions about its Llama AI models and how to make money from ads on sites like Instagram. He said that at Microsoft, it will be about making money from cloud services and its Copilot AI partner.
More direct information about how shoppers spend their money could come from other tech companies. Apple is being questioned about the iPhone 16. Keybanc experts point to data that shows a “slow upgrade path.” And while Amazon spends money on things like sports broadcasts and satellites, Dan Morgan, an analyst at Synovus, asked if the company’s main retail business could get better, since growth had slowed and customers were still wary.
