S&P 500 cuts losses as Nvidia climbs ahead of results
The prospect of lower interest rates is boosting real estate, banks, and manufacturers, but the outlook for the Magnificent Seven — Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA) — looks far less certain.
After leading indexes to record highs, these giants are now facing skepticism about stretched valuations, the durability of AI-driven growth, and competition from other corners of the market. Nvidia’s earnings this week will be a critical test of whether enthusiasm can translate into profits.
Signs of fatigue are clear. Retail investors, often the most loyal buyers of tech, turned net sellers for the first time in two months, trimming holdings in Palantir (NASDAQ:PLTR), Alphabet, and Broadcom (NASDAQ:AVGO). The AI trade has also shown fragility before, with DeepSeek’s launch of a cheaper model earlier this year erasing $1 trillion of market value in a single day. More recently,
OpenAI’s GPT-5 disappointed, undermining some of the hype that had fueled tech valuations.
The Nasdaq has climbed more than 40% since April, pushing multiples for megacaps to uncomfortable levels. At the same time, high inflation and cracks in the labor market have left investors nervous. Even after Powell opened the door to rate cuts, tech dropped 1.6% last week, lagging energy, real estate, and materials, which all gained over 2%.
Some traders are rotating into defensives like Duke Energy (NYSE:DUK), DR Horton (NYSE:DHI), healthcare funds, and Walmart (NYSE:WMT), betting they’ll hold up better if growth slows.
Thin August trading volumes are adding to volatility, but the bigger issue remains the AI hype cycle: big rallies followed by sudden reversals. Nvidia’s earnings could either reignite momentum or expose fresh doubts. For now, investors are questioning whether the Magnificent Seven can keep carrying the market, or if leadership will shift toward the sectors gaining strength from lower rates.