Fallout looms for tech

Technology stocks are set to suffer following the US slump of the “Magnificent 7,” which lost nearly US$1 trillion (HK$7.8 trillion) in market value last week.

The seven – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – led the S&P 500 to a 24-percent gain last year and then encountered their worst week in over a year.

Tech stocks are being sold off, with the Nasdaq 100 Index registering its biggest weekly drop since November 2022.

Even artificial intelligence darling Nvidia plunged 10 percent on Friday, wiping out US$212 billion in value.

Profits for the seven are forecast to rise 38 percent in the first quarter year on year, dwarfing the overall S&P 500’s 2.4 percent anticipated earnings growth, according to Bloomberg Intelligence data.

However, the problem is that when excluding Nvidia, the expected net income growth for the group falls to 23 percent, and the AI plans to get squishier.

“It appears that the expectations are that they’re really going to deliver again,” said Patrick Kaser, portfolio manager at Brandywine Global. “And so the risk to me is skewed to the downside.”

Microsoft, Meta Platforms, Google parent Alphabet and Tesla will report earnings this week.

Tesla has seen its shares tumble about 40 percent this year amid concerns about its electric vehicle business. Meta Platforms’ shares have jumped over 40 percent, while Alphabet and Microsoft are logging year-to-date gains of about 12 percent and 7.5 percent, respectively.

Beyond the megacaps, over 300 S&P 500 firms are expected to report over the coming two weeks. Earnings are expected to rise 9 percent for the full year, according to LSEG data.