Earnings season has kicked off for the “Magnificent Seven.” What does this mean for Nvidia?
Nvidia (NVDA -6.80%) stock is falling in Wednesday’s trading. The company’s share price was down 5.5% of 2:45 p.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index had fallen 2.2% and the Nasdaq Composite was down 3.3%.
Nvidia stock is losing ground in conjunction with recent earnings reports from two of the world’s biggest and most influential companies. Alphabet and Tesla each issued second-quarter results and guidance yesterday, and the reports kicked off a substantial pullback across the stock market.
Earnings season gets off to a rocky start for the “Magnificent Seven”
Earnings season is underway, and Alphabet and Tesla were the first members of the “Magnificent Seven” to report earnings. The group, which also includes Nvidia, Apple, Microsoft, Amazon, and Meta Platforms, is highly influential when it comes to shaping overall stock market sentiment. Unfortunately, Wall Street wasn’t impressed with either of yesterday’s most high-profile quarterly reports.
While Alphabet’s Q2 report arrived with sales and earnings that beat Wall Street’s targets, the company expects that costs will rise in the near term. Management expects the business’s operating income margin will slip on a sequential basis due to increased infrastructure investments and depreciation. All in all, it was actually a very strong second quarter for the Google parent, but a moderate delay for profit growth seems to have spooked the market.
Tesla’s report was more concerning. While the company managed to post revenue of $25.5 billion and beat the average analyst estimate by $760 million in the quarter, profits fell short. The company posted non-GAAP (adjusted) earnings per share of $0.52, missing Wall Street’s target for per-share earnings of $0.62. Price cuts have helped sales, but margins are slipping, and it looks like the business could face some continued inventory issues.
Alphabet stock was down 4.9% as of this writing. Meanwhile, Tesla was down 10.9%.
The recent reports have some silver linings for Nvidia
But there was actually some good news for Nvidia in both of these reports. Google Cloud revenue rose 29% year over year to reach $10.35 billion in Q2, which tracks with demand for the GPU leader’s tech continuing to be robust. While the market was concerned about Alphabet’s rising infrastructure spending, there’s a fair chance this is actually a bullish signal for Nvidia.
Tesla is also spending heavily on artificial intelligence (AI) and will continue to do so according to comments in its quarterly call. With growth for the company’s auto business stalling, investors aren’t thrilled with the costs associated with perfecting autonomous driving and other artificial intelligence initiatives. But it seems unlikely that CEO Elon Musk will let off the gas, and the company should continue to be an eager Nvidia customer.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
