Tech Earnings Drive Market Sell-Off
Monday's market sell-off highlights the importance of big tech earnings to the bull market and expectations for 2025.
Chinese AI Sparks Rout
Concerns over competition from Chinese AI company DeepSeek caused investors to pause in the US AI trade, leading to an 11% drop in Nvidia stock. Other "Magnificent Seven" members (Microsoft, Alphabet, Meta, Amazon, Tesla) also fell significantly.
Slowing Earnings Growth a Risk
Strategists have warned of the risk of slowing earnings growth in big tech. With index valuations high and the "Magnificent Seven" comprising nearly 40% of the S&P 500, the rally is seen as vulnerable.
AI Model Launch Raises Questions
DeepSeek's AI model launch provides a tangible reason for investors to question high earnings expectations.
Big Tech Earnings Remain Crucial
Despite the slowdown, big tech earnings growth is expected to remain a key driver of the bull market in 2025, with the "Magnificent Seven" projected to grow earnings by 21.7% in Q4 compared to 9.7% growth for other tech stocks.