Nasdaq 100 Forecast: “Magnificent Seven” Q2 2024 Earnings Preview

Nasdaq 100 Key Points

• “Magnificent Seven” earnings growth is expected to slow for the second straight quarter, whereas the “Other 493” stocks will see positive earnings growth this quarter.
• Risks to the AI trade include excessive capex without appropriate returns and the possibility of stricter regulations or tariffs.
• The Nasdaq 100 is in a precarious technical position after breaking below a near-term bullish trend line and slipping below the $20K level.

Magnificent Seven Earnings Preview – MSFT, AAPL, GOOG, AMZN, NVDA, META, TSLA

Like an massive oil tanker turning, the balance of earnings growth is expected to shift ever-so-incrementally away from the “Magnificent Seven” big technology stocks (Microsoft, Apple, Nvidia, Alphabet/Google, Meta/Facebook, and Tesla) and toward the “Other 493” this quarter. Indeed, as the chart below shows, analysts expect the non-Magnificent-Seven stocks in the S&P 500 to show positive earnings growth for the first time in five quarters, whereas the “Magnificent Seven” stocks could see slowing earnings growth for the second consecutive quarter:

Source: Bloomberg, Wells Fargo

In any technological revolution, the hype eventually outpaces the fundamental impact of the technology, and some traders are starting to wonder if we’re nearing that inflection point when it comes to AI. In recent weeks, several prominent analysts have raised warning flags about the level of capital expenditures related to AI, questioning whether these “investments” will have a payback period that remotely justifies the cost or whether executives have simply been afraid to be left behind competitors in their investments, without considering the end use cases.

Separately, political risks to the Magnificent Seven are on the rise. While not likely a major impact on this past quarter’s earnings, the risk of tariffs and additional regulations on semiconductor chips could weigh on the Magnificent Seven as a whole, limiting the tech behemoths’ ability to continue growing earnings rapidly in the future. As a result, the companies’ guidance and outlooks for the rest of the year and into 2025 will be a key theme this earnings season.

Below, we highlight the earnings dates and the market’s expectations for each of the Magnificent Seven stocks in order of their reporting dates:

Tesla – July 23. EPS expected at $0.46.

Facebook/Meta Platforms – July 31. EPS expected at $4.68.

Microsoft – July 30. EPS expected at $2.90.

Alphabet/Google – July 23. EPS expected at $1.85.

Amazon – August 1*. EPS expected at $1.02.

Apple – August 1. EPS expected at $1.33.

Nvidia – August 22*. EPS expected at $0.59.

* Estimated date

Nasdaq 100 Technical Analysis – NDX Daily Chart

Source: TradingView, StoneX

As of writing in mid-July, the Nasdaq 100 is in a precarious position. The tech-heavy index, which features a nearly 50% allocation to the “Magnificent Seven” stocks, has just broken below a near-term bullish trend line and slipped below the $20K level. That said, the longer-term trend remains intact, with the 50-day EMA and 200-day SMA still rising at a solid rate.

If the earnings results in the coming weeks are able to meet or beat expectations, the tech-heavy index could regain the 20K handle and potentially retest the record high near 20,750 in short order. However, if weak earnings reports start to accumulate and the index is unable to recapture the 20K level, it could set the stage for a continuation down toward the 50-day EMA in the mid-19Ks or the levels of previous-resistance-turned-support at 18,900 and 18,400 as we move through the dog days of summer.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX