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The “Magnificent 7” tech giants continue to exert their dominance over the S&P 500, with four of these companies projected to rank among the top 10 contributors to earnings growth for the third quarter of 2024, according to a note published by FactSet on Monday.
NVIDIA and Alphabet are expected to lead the charge, claiming the top two spots. NVIDIA, in particular, is poised to be the single largest driver of earnings growth for the index, fueled by soaring demand for its chips used in artificial intelligence.
However, the report also reveals that the influence of “Magnificent 7” on earnings might be waning. While these companies are collectively projected to report an 18.1% year-over-year earnings increase for Q3 2024, the remaining 493 companies in the S&P 500 are expected to see a meager 0.1% growth. This disparity highlights the heavy reliance of the index on a handful of mega-cap tech companies
Interestingly, analysts anticipate a shift in the earnings landscape in the coming quarters. While the “Magnificent 7” are expected to maintain double-digit earnings growth over the next five quarters, the rest of the S&P 500 is predicted to catch up, also achieving double-digit growth during the same period.
This projected convergence suggests that the broader market is poised for a period of robust earnings expansion, potentially reducing the S&P 500’s dependence on the “Magnificent 7.” Analysts forecast overall S&P 500 earnings growth rates exceeding 13% for each of the next four quarters, reaching as high as 17.1% in Q3 2025.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Source : Nasdaq