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NVIDIA's Q4 Earnings Blowout: Buy, sell or hold?
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"Mag 7" is Now Worth More Than All Major Stock Markets Except the US: Who Among Them Boasts the Strongest Profitability?

Moomoo News Global joined discussion · Feb 27 03:54
Mega-cap tech stocks continue to lead the U.S. stock market higher this year, driving major indices such as the $S&P 500 Index(.SPX.US)$ and $NASDAQ 100 Index(.NDX.US)$ to record highs. Among the Magnificent 7 this year, the most impressive performer is $NVIDIA(NVDA.US)$, which has risen nearly 60% since the beginning of the year, followed closely by $Meta Platforms(META.US)$ with almost a 40% increase.
With the rapid growth in stock prices and profits of the Magnificent 7, Deutsche Bank strategist Jim Reid recently pointed out that the combined market cap of the Magnificent 7 would make it the second-largest country stock exchange in the world, higher than China's A-share market, currently the world's second-largest stock market, and more than double that of Japan's stock market. The Magnificent 7's profits are roughly half that of China's stock market profits, equivalent to Japan's.
"Mag 7" is Now Worth More Than All Major Stock Markets Except the US: Who Among Them Boasts the Strongest Profitability?
Decoding the Profit-Making Capabilities of the Magnificent Seven
Reviewing the latest earnings season, the profitability gap between the Magnificent Seven has become increasingly evident. Among them, AI leader $NVIDIA(NVDA.US)$ once again demonstrated its leading position, benefiting from the rapid development of AI technology and the expansion of AI applications, delivering impressive results. Its revenue soared to $22.1 billion in the quarter ending January 28, up 265% from the previous year's $6.05 billion. A whopping 83% of the revenue is contributed by the data center business, up from only 40% two years ago. The latest quarter saw the data center performance surge by 409%, reflecting the increased shipments of $NVIDIA(NVDA.US)$'s Hopper GPU used for training and inference of large language models and generative AI applications. $NVIDIA(NVDA.US)$'s net profit surged 769% from $1.41 billion to $12.29 billion, far exceeding analysts' expectations. Gross margin also rose from 63.3% in the same period last year to 76%, highlighting the profitability of $NVIDIA(NVDA.US)$'s "sales shovels" in AI.
The market wasn't particularly impressed with the $Alphabet-A(GOOGL.US)$ and $Apple(AAPL.US)$ reports, but they both recorded net income growth of 51.8% and +13.1% respectively in the latest earnings season.
Meanwhile, EV leader $Tesla(TSLA.US)$ once again disappointed investors, with total revenue in the fourth quarter of last year growing 3% YoY to $25.17 billion, lower than the expected $25.6 billion, and adjusted earnings per share plummeting 40% YoY to $0.71, still lower than the expected $0.74.
Although the Magnificent Seven are all in the technology industry, their cash flow structure and growth trajectory differ. Some companies' profitability relies on a diverse combination of applications, cloud services, products, and accumulated data, while others are more focused. The chart below compares the Magnificent Seven's money-making abilities, including where they make their money from.
"Mag 7" is Now Worth More Than All Major Stock Markets Except the US: Who Among Them Boasts the Strongest Profitability?
Can the Magnificent Seven of the US Stock Market Maintain Their Winning Momentum?
$NVIDIA(NVDA.US)$'s impressive profitability and stock price have not only become a significant factor driving the US stock market but also further spurred the expansion of the global AI wave and the rise of global stock markets. Compared to the rising trend driven by expectations of a US Fed rate cut at the end of last year, the steadfast belief in AI and NVIDIA's further upward momentum have supported the development of the US stock market since 2024. The S&P 500 has risen 6.7% to date, while market expectations for a Fed rate cut have been pushed back from as early as March to June or even the second half of the year. Some have joked that investors seem to care more about NVIDIA CEO Jensen Huang than about Fed Chairman Jerome Powell.
Market Opinions Are Divided on Whether the Mag 7 Can Continue to Rise
The bullish view argues that although the valuations of large tech stocks seem expensive, NVIDIA's financial report proves that as long as the growth rate is high enough, high valuations can be fully digested by earnings, gradually lowering the dynamic valuation and highlighting the rationality of the valuation level. Goldman Sachs also pointed out that compared to historical highs, the current market valuation is still far from the bubble territory. The current P/E ratio of the Nasdaq is 35 times, which reached 90 times during the tech bubble of the late 1990s. In addition, advancements in AI technology may bring productivity improvements, thereby increasing corporate profits and suppressing inflation pressures. Furthermore, hedge funds' reduction of positions in the Mag 7 in the fourth quarter of last year has provided room for them to increase their bets at the current stage, and short sellers targeting these stocks may also be waiting for an opportunity to exit. Potential short covering will help boost the continued rise of stock prices.
The cautious view expresses concern about the high valuations of tech stocks and the high concentration of market funds in the Mag 7. The concentration of chips means that once the performance of major tech companies is proven to be unable to match extremely optimistic expectations, or if the AI belief collapses or other black swan events occur, the market will experience a stampede-like decline.
Last week, Jim Reid, Head of Global Economic and Thematic Research at Deutsche Bank, warned that the U.S. stock market is "rivalling 2000 and 1929 in terms of being its most concentrated in history."
Source: Bloomberg, Deutsche Bank, Goldman Sachs
By Moomoo News Irene
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