A shift in momentum for the Magnificent 7 tech giants is emerging, with Nvidia and Applied Materials reporting tepid earnings guidance that undercut broader market sentiment. The downturn signals potential cracks in the sector’s prolonged rally.
- Nvidia’s after-hours share drop of 12.3% erased $210 billion in market value.
- Applied Materials reported a 5% decline in adjusted EPS and cut 2026 capex forecast by 10%.
- Magnificent 7 aggregate market cap declined 5.6% from January 1 to January 8, 2026.
- Nasdaq Composite fell 1.8% in response, its steepest drop in three weeks.
- U.S. large-cap growth ETFs saw $8.4 billion in outflows over one week.
- Utilities and consumer staples posted a 3.2% gain during the same period.
The sustained outperformance of the Magnificent 7—comprising Apple, Microsoft, Amazon, Nvidia, Alphabet, Meta, and Tesla—has begun to show signs of strain. In early January 2026, Nvidia reported a 7% drop in quarterly revenue guidance, citing slowing AI chip demand in China and Europe. The company’s shares fell 12.3% in after-hours trading, erasing $210 billion in market value within a single session. Applied Materials Inc. followed suit, delivering a 5% decline in adjusted earnings per share and revising its 2026 capital expenditure forecast downward by 10%. The announcement triggered a 14.5% sell-off in its stock, marking its largest single-day drop since 2022. These developments coincided with a 1.8% decline in the Nasdaq Composite, the steepest drop in three weeks. The performance of these two semiconductor leaders is particularly telling, as they are central to the growth narrative underpinning the Magnificent 7. Nvidia’s AI-driven revenue surge had accounted for nearly 35% of the group’s total market cap gain since 2023. The recent reversal has led to a 5.6% decline in the Magnificent 7’s aggregate market capitalization between January 1 and January 8, 2026. Investors are now reassessing the sustainability of the tech sector’s dominance, with mutual fund outflows from U.S. large-cap growth ETFs reaching $8.4 billion in the past week. The shift is also prompting renewed interest in value-oriented sectors such as utilities and consumer staples, which saw a 3.2% rally over the same period.