This Q2 earnings season saw the spotlight firmly cast on the ‘Magnificent Seven.’ Featuring NVIDIA (NVDA), Tesla (TSLA), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL, GOOG), Meta (META), and Amazon (AMZN). This group of mega-cap tech stocks has propelled major indices higher and outperformed the broader market.
Venturing into the second half of the year, we examined the status of each member of the ‘Magnificent Seven’ heading into the Q2 2023 earnings season. Now that all seven of these companies have reported earnings, check out our post-earnings wrap to see how they stand.
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The dominating narrative in the stock market this year has revolved around the rapid strides in Artificial Intelligence (AI) technology. A standout beneficiary of this trend has been NVIDIA, a leading chip manufacturer based in Santa Clara, California. As of June 30th, NVIDIA’s stock has surged 190% this year, largely attributed to its pivotal role in the burgeoning AI sector. With tech giants like Google and Microsoft also heavily invested in the AI race, NVIDIA has become a major player in powering that journey.
As more companies embrace AI they’ll continue to use NVDA’s “three-chip strategy” data center architecture to train their AI models. The company says it currently powers 74% of the TOP500 supercomputers on its data center architecture.
Tesla, a pioneer in electric vehicles (EVs), has been instrumental in driving the advancements in autonomous technology within the automotive industry. The first half of 2023 has seen the company’s stock soar by 113%.
Apple continues to maintain its reputation as one of the most successful publicly traded companies, and this year has been no exception. Apple’s stock rose by 49.7% in the first half of the year, propelling the tech giant to become the first company in history to reach a $3 trillion valuation.
The answer lies with Apple’s services segment, which includes the App Store, Apple Music, iCloud, and other subscriptions. This segment has emerged as a significant revenue generator, reaching a whopping $20.9 billion last quarter.
Even as a blue-chip stock, the company still sees substantial growth potential in emerging markets. India, now the world’s most populous nation, seems to be particularly enticing to Apple. In April, Apple’s CEO Tim Cook visited India to inaugurate the first official Apple store in Mumbai, highlighting the company’s strategic move to capture the vast market opportunity in the country.
With its strategic stake in OpenAI, Microsoft directly benefitted from the hype surrounding AI to start the year. OpenAI is the creator of the popular Large language model (LLM), ChatGPT. Microsoft stock has risen 47% on the year, reflecting successful quarters across various company segments.
In addition to subscriptions for GPT-4 (an enhanced version of ChatGPT), OpenAI has monetized its API, which is powered by Microsoft’s Azure Cloud platform. Azure has been experiencing sustained growth, bolstering its importance in Microsoft’s enterprise ventures.
The company’s Office 365 platform also made strides in both consumer and commercial segments. While renowned for its enterprise solutions, Microsoft continues to make a significant impact in the consumer market. This is particularly evident in the performance of LinkedIn, a social media platform owned by Microsoft, which generated an 8% increase in revenue in Q1. This growth attests to the diverse avenues in which Microsoft is extending its market influence.
Alphabet, with a 35.7% stock increase this year as of June 30th, is another major player on the LLM side of the AI space, particularly with the release of Bard. Despite initial speculations of Alphabet lagging in the AI race due to ChatGPT’s early success, the company remains deeply committed to AI across various facets. This was highlighted in the last quarter’s earnings call where AI was mentioned 64 times.
In an effort to expedite its AI development, Alphabet has combined the Brain Team in Google Research with Deep Mind, the company known for creating AlphaGo. AlphaGo’s groundbreaking Move 37 marked a pivotal moment in AI, showcasing its ability to not only emulate but also innovate beyond human thought patterns.
Most of the buzz surrounding Meta Platforms Inc. (META) this year revolves around the recent launch of Threads, the company’s answer to Twitter. Its stock was still surging prior to that, recording a lift of 138.5% as of June 30th.
The stock performance can partly be attributed to cost-cutting measures undertaken at the beginning of the year. Additionally, despite the recessionary concerns in the early part of the year, Meta has managed to grow its advertising revenue by 4.1% year over year.
Despite being relatively subdued in news compared to its “Magnificent Seven” peers, Amazon’s performance has been solid, with its stock up 55.2% as of June 30th. Like other big tech companies, Amazon kicked off the year with cost-cutting initiatives and undertook efforts to clean up its balance sheet in the first quarter.
When it comes to Amazon, analysts often pay special attention to Amazon Web Services (AWS). A significant milestone for AWS was the launch of Amazon Bedrock, a platform where AWS customers can develop enterprise-grade generative AI applications. In terms of numbers, AWS accounted for 17% of Amazon’s net sales, and its revenue rose by 15.8% year-over-year in Q1.
These companies have outperformed the broader market and have set a solid foundation heading into the second half. It’s evident that these industry behemoths are not just riding the wave of technological innovation, but they are the ones creating it. This earnings period provided further insights into their growth trajectories and sector-wide trends.
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