According to Zhongtong Finance APP, the leading position of the "Seven Giants" in driving the earnings growth of the S&P 500 index may soon come to an end. Analysts predict that the group's performance growth will slow down in Q2 2024, while another 493 companies are expected to see their first positive growth since Q4 2022.
Over the past three quarters, the "Seven Giants," including Microsoft (MSFT.US), Amazon (AMZN.US), Meta (META.US), Apple (AAPL.US), Alphabet (GOOGL.US), Nvidia (NVDA.US), and Tesla (TSLA.US), have almost dominated the profit growth of the S&P 500 index components. However, Bank of America analysts predict that the Q2 earnings report will show a trend of expanding overall profit growth, not just for these seven giants.
Another 493 constituent stocks of the S&P 500 index will report earnings growth.
Bank of America analysts say that the growth rate of the other 493 constituent stocks in the S&P 500 index, excluding the Seven Giants, will rise while the Seven Giants will slow down. This may be the beginning of the expansion of the overall market growth trend.
They predict that the Q2 earnings of the S&P 500 index will increase by 10% year-on-year, and after excluding the Seven Giants, the index will increase by 6%, marking the first positive change since Q4 2022.
Analysts say that the Q2 earnings per share (EPS) of the constituents of the index will typically be 2% higher overall. This 2% increase will be consistent with historical average levels but will be the smallest quarterly EPS increase since Q4 2022.
The performance of the Seven Giants is expected to slow for the second consecutive quarter.
According to LPL Financial data, the Seven Giants have been driving the profit growth of the S&P 500 index over the past three quarters, accounting for more than half (59.5%) of the index's total return in the first half of this year. However, analysts predict that the group's profit growth will slow for the second consecutive quarter.
Although the improved growth rate of the remaining 493 companies may offset the impact, the sluggish earnings of the Seven Giants may make investors doubt that their strong growth period is coming to an end.
The enthusiasm for artificial intelligence (AI) has driven the strong performance of the Seven Giants in recent quarters, but some experts are concerned that investors' expectations are so high that these companies may have difficulty meeting them.
Since early 2024, Nvidia, Meta, Alphabet, Amazon, Microsoft, and Apple have all outperformed the S&P 500 index. Tesla is the only company among the Seven Giants that lags behind the index, but its recent stock price rebound, driven by Q2 delivery data that exceeded expectations and expectations for the upcoming Robotaxi, has wiped out the losses from the first half of the year and risen by only 6.6%.