Tech Giants Shine Bright, But Broader Market Gains Speed

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Steady Growth Amid Emerging Challenges

The “Magnificent 7” tech companies are still leading the charge in the S&P 500. A recent report from FactSet reveals that four of these firms are projected to be among the top 10 contributors to earnings growth for the third quarter of 2024.

NVIDIA and Alphabet Take the Lead

NVIDIA and Alphabet are set to dominate, taking the first two positions in expected growth. NVIDIA, in particular, is on track to emerge as the largest force behind earnings growth, driven by increasing demand for its chips utilized in artificial intelligence.

A Shift in Market Dynamics

Despite the impressive figures, the report suggests that the influence of the “Magnificent 7” might be lessening. Collectively, these companies are projected to hit an 18.1% year-over-year earnings increase for Q3 2024. In stark contrast, the other 493 companies in the S&P 500 are expected to experience a minimal growth of just 0.1%. This trend points to a considerable dependence on a few tech giants for the overall performance of the index.

Broader Market to Catch Up

Looking ahead, analysts predict an alteration in the earnings landscape. The “Magnificent 7” are expected to continue enjoying double-digit earnings growth for the next five quarters. However, the remaining companies in the S&P 500 are also forecasted to catch up and achieve double-digit growth in that same period.

This anticipated convergence implies a strong future for the overall market, with expectations of S&P 500 earnings growth rates surpassing 13% for the next four quarters. By Q3 2025, growth could peak at 17.1%, potentially decreasing the overall dependence on the “Magnificent 7.”

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.