Analysing how Nvidia, Microsoft, Meta, and other tech giants may influence the US stock market direction during Q2 2025 earnings season.
US Q2 earnings: “Magnificent 7” may continue to drive US stock market gains
Since the post-COVID rebound in 2020, much of the S&P 500 and Nasdaq 100’s gains have been driven by six mega-cap tech giants: Apple, Alphabet, Amazon, Microsoft, Meta Platforms, and Nvidia, along with Tesla, collectively known as the “Magnificent 7."
Based on the latest data from Slickcharts.com, the combined weightage of the “Magnificent 7” in the S&P 500 is at 30% and it forms a higher weightage of 59% in the Nasdaq 100.
This article will examine whether the share prices of the “Magnificent 7” can continue to drive the ongoing rally seen in the S&P 500, or has the US stock market started to broaden out?
Fig. 1: YTD performance of major US stock indices & Mag 7 as of 28 July 2025 (Source: TradingView). Past performance is not indicative of future results.
Fig. 2: Performance of major US stock indices & Mag 7 from 7 April to 28 July 2025 (Source: TradingView). Past performance is not indicative of future results.
Based on year-to-date performances (excluding dividends) as of Monday, 28 July, the technology-heavy Nasdaq 100 led the pack with a positive return of 11.35% followed by the S&P 500’s gain of 8.88% (see Fig. 1).
After the US stock market’s sell-off that materialised in Q1 (February to April), a major low was formed on 7 April, seen across all four major US benchmark stock indices (S&P 500, Nasdaq 100, DJIA, and Russell 2000), an exchange traded fund (MAGS) based on the “Magnificent 7” took the leading driving seat and led the market with a tremendous gain of 40.3% (7 April to 28 July) outperforming the Nasdaq 100 (34%), and S&P 500 (40.34%) (see Fig. 2).
“Magnificent 7” performance is not uniform
Fig. 3: YTD performance of Mag 7 ETF, NVDA, MSFT, META, AMZN, GOOGL, AAPL & TSLA as of 28 July 2025 (Source: TradingView). Past performance is not indicative of future results.
Fig. 4: Performance of Mag 7 ETF, NVDA, MSFT, META, AMZN, GOOGL, AAPL & TSLA from 7 April to 28 July 2025 (Source: TradingView). Past performance is not indicative of future results.
However, not all the “Magnificent 7” stocks are showing the same magnitude of positive returns. Based on year-to-date performance as of 28 July, Nvidia (27.81%), Microsoft (22.91%), and Meta Platforms (19.96%) outperformed due to their respective artificial intelligence (AI) business revenue generators, while the rest lagged, especially Apple (-12.01%), and Tesla (-14.16%) with negative returns (see Fig. 3).
A similar trend has emerged between 7 April and 28 July, with Nvidia surging 81.03% and Microsoft gaining 43.48%, leading the pack (see Fig. 4).
Traders should closely monitor the Q2 earnings results of Nvidia, Microsoft, and Meta Platforms, as well as the post-earnings price reactions. These outcomes could significantly influence the direction of the S&P 500 and Nasdaq 100.
No clear signs of broadening out in the US stock market
Fig. 5: Ratio of S&P 500 market-cap/S&P 500 equal-weight major trend as of 29 July 2025 (Source: TradingView). Past performance is not indicative of future results.
The ratio chart of the market-cap weighted S&P 500 versus the equal-weighted S&P 500 ETF (RSP) suggests further potential outperformance of the market-cap S&P 500, supported by two technical elements (see Fig. 5).
Firstly, the ratio chart of SPY/RSP has staged a bullish breakout above its former major descending resistance from its July 2024 peak,
Secondly, the weekly RSI momentum indicator of the ratio continues to exhibit bullish momentum conditions above the 50 level and has not reached its overbought region (above 70).
Technical indicators therefore suggest that the share price movements of the “Magnificent 7” are likely to have a significant impact on the performance of the market-cap S&P 500, and the underperformance of the Dow Jones Industrial Average and the Russell 2000 may continue to persist
