Nvidia (NASDAQ:NVDA) earnings carry a lot of weight for the entire market because expectations for earnings growth from the chipmaker drive much of the success of the Magnificent Seven and, thus, the S&P 500. If you want to know why the Magnificent Seven has outperformed this year, it is primarily because of expected earnings growth of some 40% this year and then by 22% next year.
This is the only part of the S&P 500 growing at this pace, especially considering the S&P 500 is expected to see no growth in 2023 and about 10% growth in 2024, based on the Bloomberg Magnificent 7 index. The S&P 500 equal weight index is up less than 5%.
Since the middle of May, when Nvidia reported the blowout earnings report and gave significantly higher than expected guidance, earnings estimates for the group have increased by 17.5% for this year and 18.3% for next year. This, plus some multiple expansions, has helped to drive the Magingificant 7 index higher by around 30%.
Since mid-May, earnings revisions for most of the companies have been modest, and perhaps surprisingly, Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL) have seen hardly any upward revisions to their forecast, while Tesla (NASDAQ:TSLA) has seen its earnings forecast slashed.
Meta (NASDAQ:META) has seen healthy upward revisions, and anyone who has followed Amazon (NASDAQ:AMZN) long enough knows that earnings growth from the company is not dependable. The only company that has seen a huge and outsized increase in earnings revisions is Nvidia. Nvidia’s earnings estimates since its May earnings reports have risen by almost 140% for fiscal year 2024 and 190% for fiscal year 2025.
Therefore, it seems pretty logical to assume thatRead more on investing.com