Tesla, NVIDIA, Apple & Co: Magnificent Seven shares cause NASDAQ to slide into correction – Should investors be worried now?

• NASDAQ Composite slips into correction territory
• Performance of the Magnificent Seven partly responsible
• Experts warn against panic

Trading on the US stock markets is currently a roller coaster ride. Numerous uncertainty factors ensure that investors act very cautiously. Geopolitical tensions in the world have recently increased again with the war between Israel and Hamas. In addition, the high bond yields for long-term US bonds are also weighing on the markets. The continued high interest rates and increased inflation also contribute to market participants being more cautious.

The US tech stocks index NASDAQ Composite fared somewhat better, depending to a large extent on the development of the seven tech heavyweights Apple, NVIDIA, Meta Platforms, Google parent Alphabet, Tesla, Microsoft and Amazon, also known as ” “Magnificent Seven”. This year, the tech giants in question have already benefited significantly from the hype surrounding the trend topic of artificial intelligence. The NASDAQ Composite has already gained more than 22 percent since the beginning of the year. For comparison: the market-wide S&P 500 rose 8.5 percent. At 14,446.55 points, the tech index also reached a 52-week high in mid-July, from which it recently moved more than ten percent away – and thus officially slipped into correction territory from a technical point of view.

Magnificent Seven Stocks Move Big on NASDAQ Composite

The reason for this was the Magnificent Seven’s most recent quarterly reports, because so far all of them – with the exception of Apple and NVIDIA – have presented figures and met with a mixed response. Amazon was able to impress with a considerable jump in profits and sales, which ultimately sent the online mail order company’s shares up almost seven percent to $127.74 after the figures were published. The software and hardware manufacturer Microsoft was also able to beat expectations in terms of profits and sales and therefore exited NASDAQ trading with a plus.

Quarterly balance sheets from Tesla, Google and Meta disappoint – stocks slide

Meanwhile, the quarterly reports from the three other tech giants Tesla, Google and Meta caused long faces among investors. So the electric car manufacturer remained under the leadership of a jack of all trades Elon Musk sales and profits fell short of expectations. However, the pessimistic statements made by the company leader in the earnings call were even more significant. Here, Musk described Tesla, among other things, as a “ship in a storm.” Investors then acknowledged the numbers and Musk’s appearance with a discount of ultimately 9.3 percent to $220.11. At Google parent Alphabet, disappointing cloud growth led to share sales, with shares ultimately falling 9.51 percent to $125.62. Facebook parent Meta Platforms was actually able to report good quarterly figures, but cautious statements from Meta CFO Susan Li sent investors fleeing. The social network assumes that the Middle East war could slow down the online advertising business. This has already been observed in past conflicts. Ultimately, the Meta share fell 3.73 percent to $288.35.

Due to their large market capitalization, the shares of the Magnificent Seven have a great weight in the NASDAQ Composite and therefore have a major impact on the index with their performance. This can have a positive effect if the heavyweights show good development. However, this also represents a cluster risk if the trend reverses. Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance: “I think the key factor was that we relied on the outperformance of a short list of mega-cap technology stocks.”

AI trend not yet monetized

Even though the tech giants have been able to benefit from the AI ​​trend so far this year, they are not immune to the macroeconomic factors that are currently weighing on all companies in the USA. In addition, technology stocks in particular are coming under pressure due to their high financing requirements in an environment of high interest rates. In addition, Yahoo Finance argues that the tech industry has been riding the AI ​​wave so far, but has not yet managed to fully monetize the trend. This is also because chip designers like NVIDIA are struggling with delivery problems.

Experts advise investors: Don’t panic

However, investors who are long-term oriented should not be disturbed by the current downward trend, GraniteShares boss Will Rhind told the financial portal: “Interest rates are most likely at the peak of the cycle and the economy is still in pretty good shape good condition.” Nevertheless, it is important that investors in these times also have “high-quality companies in their portfolios that show growth and sustainability on their balance sheets.”

Ivana Delevska from Spear Invest also warns investors not to panic in view of the sometimes drastic price declines in the Magnificent Seven, as she explains to Yahoo Finance. Such price declines are often due to a vicious circle of debt reduction and margin calls, in which investors have to sell a company that they actually believe in for the long term in order to cover other demands. It could therefore happen that a company like Google is sold off even though it actually has no problems at the fundamental level.

How the performance of the NASDAQ Composite develops will also depend on the outstanding balance sheets of the Magnificent Seven. iGroup Apple follows next, namely after-hours on November 2nd. NVIDIA numbers will finally be presented on November 21, 2023.

Editorial team finanzen.net

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