Mega cap tech earnings will kick-off next week and cloud computing growth, AI applications, profit margins and regulations will be key pointers. Big tech has been crucial in driving US markets higher in recent years and so setting a positive tone for the year ahead will be crucial.

The so-called ‘Magnificent Seven’ stocks – Alphabet (GOOG:NASDAQ), Amazon (AMZN:NASDAQ), Apple (AAPL:NASDAQ), Meta Platforms (META:NASDAQ), Microsoft (MSFT:NASDAQ), Nvidia (NVDA:NASDAQ) and Tesla (TSLA:NASDAQ) lived up to the name in 2024 with average share price gains of 60% last year.

Because of their outsized market capitalisations, Magnificent Seven stocks enjoy a disproportionate influence on the market-cap weighted Nasdaq Composite and S&P 500 indexes, and they likely feature in just about every ordinary investor’s portfolio in one way or another.

What the market expects of next week’s big tech earnings

JPMorgan has calculated that the Magnificent Seven stocks accounted for an incredible 75% of S&P 500 earnings growth last year, but expects that to fall to 33% in 2025 as the AI rally broadens.

There’s a been some evidence of mild profit taking in the first weeks of 2025, and Donald’s Trump’s inauguration speech seeded volatility when he announced plans for 25% tariffs on Canada and Mexico, a pivot that highlights just how unpredictable the new administration’s approach is likely to be, and how sensitive markets are to this uncertainty.

Outside of the larger issues, there are key questions to be answered at each company. For example, Apple’s AI-powered iPhone 16 sales have looked a little limp with savage competition in China emerging, while Tesla volumes have been shy of expectations and the big question is when will profit margins start to recover.

Amazon’s continued leadership in the hyperscale cloud sector, which has been growing at around 20%, has helped support its shares, especially with cost-cutting improving ecommerce efficiency.

Streamlining costs has helped bolster Meta’s stock performance too, but it is still aiming to lavish billion of dollars on AI projects, as has Microsoft. The latter is further ahead when it comes to generating new revenue and profit streams from its own AI outlay, where its integration of AI tools like Copilot across its software suite has impressed analysts.

Expect plenty to chew over as the reports come in. Alphabet is due to report the following week (4 February), while Nvidia’s fourth quarter and full year figures are due 26 February. 

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