Over the last year, shares of big tech companies, aka Magnificent Seven (Meta, Amazon, Apple, Nvidia, Alphabet, Microsoft, and Tesla), collectively surged more than 96%. Unfortunately, nothing can last forever.
The anticipation that corporate earnings growth may slow down with the global economy decelerating led to the decline in the stocks of these tech giants. This has prompted analysts to revise their expectations.
Microsoft achieved a record revenue due to robust cloud growth, but the stock stayed flat. The software giant reported a record $62 billion in sales for the three months ending in December, a rise of 18%. Increased excitement surrounding artificial intelligence contributed to a 30% growth in sales for Microsoft's Azure cloud division.
On the flip side, another tech behemoth didn’t achieve even such a result. Alphabet exceeded revenue expectations with a 13% increase to $86.3 billion; however, its stock took a hit a day after the impressive earnings report.
Google's parent company experienced an approximately 8% decline on Wednesday, concluding the challenging session at $140.10 per share. Just prior to this, the stock had reached a record high of $154 per share. Despite reporting a 13% rise in revenue compared to a year ago, Google's advertising showed a slight misstep with a turnover of $65.5 billion, roughly $500 million below the estimated $65.94 billion, which also contributed to the stock drop.
Contrary to expectations over the past two years, major technology stocks have remained resilient, even as the dollar, gold prices, and bonds have increased. A correction could be triggered by a decline in confidence in consumer demand, production issues, and, importantly, lackluster quarterly results, which, for most of them, hasn't been the case so far.
Answering the question whether it's a good idea to increase your investment in major tech now, the potential return appears lower than the risk involved. A shift in the Federal Reserve's monetary policy could give major tech stocks a lift. However, with strong GDP data and uncertainty about overcoming inflation, it’s too early to talk about rate cuts. Anyway, the decision regarding investment should be based primarily on your own research.
