Magnificent Seven Stocks Slip Into Correction as Nvidia Earnings on Deck

The Magnificent Seven group of major technology stocks were gaining ground Wednesday after moving into correction territory on Tuesday as concerns about slowing growth and elevated valuations grew in the lead-up to Nvidia’s quarterly earnings this afternoon. 

The Bloomberg Magnificent 7 Total Return Index had declined 10.7% from its all-time high on December 17, as of Tuesday’s close. The Roundhill Magnificent Seven ETF (MAGS), which is constructed differently than the Bloomberg index, had fallen more than 11% over that time. 

The ETF’s current slump is its third correction since it launched in April 2023. The first was a slow, shallow 12% slump from late July 2023 to late October of that year. The second was a sharp 18% drop that began amid a rotation into small-cap stocks in mid-July and bottomed with the yen carry trade rout of early August. 

Nvidia Results Come Amid AI, Earnings Uncertainty

The group rebounded slightly on Wednesday morning as Wall Street geared up for fourth-quarter earnings from AI chip giant Nvidia (NVDA) after the bell. The AI bellwether’s results come amid growing anxiety on Wall Street about slowing earnings growth and the economics of AI, two driving forces behind the Magnificent Seven’s meteoric rise.

Earnings growth at Magnificent Seven companies, which has run in the double digits for much of the past two years, has begun to slow as year-over-year comparisons have become more challenging. At the same time, growth at the rest of the S&P 500, or “the Other 493,” is accelerating—albeit, from a low base. 

The Magnificent Seven-led AI trade has also hit a speed bump this year. Chinese start-up DeepSeek rattled Wall Street late last month with an open-source model it said matched the performance of leading American models at a fraction of the cost. The revelation prompted investors to question the utility of the Magnificent Seven’s massive investments in AI infrastructure. 

Many Wall Street and Silicon Valley denizens have since argued that DeepSeek’s threat to American tech has been overblown. Tech giants have mostly stood by their aggressive AI spending plans and signaled demand for AI remains robust. Nonetheless, tech stocks have yet to recover from their DeepSeek sell-off.