Nvidia's latest earnings report represents growing shift among Mag. 7 companies

Nvidia's Q2 earnings report release exposed a growing trend which is damaging the predisposed dominance of the Magnificent Seven and other top leaders in the technology and artificial intelligence industries.

A Nvidia "Experience AI in Action" poster, I-Hwa Cheng.

Nvidia has previously been a dominant leader in the artificial intelligence economy, leading the intersection between chipmaking and AI integration through its high-demand lineup of Blackwell processors, causing investors to react strongly to the stock, with it rising from just under $100 earlier this year to now over $180. Many analysts hoped that Nvidia could carry its momentum from previous quarterly earnings reports, with it beating nearly every of its earnings calls for several years. The stock went up earlier this week in the wake of enthusiasm.

However, the AI innovator's Q2 earnings report proved otherwise, causing the stock to fall. Several datapoints did show optimism, such as adjusted earnings per share (EPS), which clocked in at $1.05, higher than analyst expectations of $1.01. Revenue reached $46.74 billion, exceeding the anticipated $46.05 billion by investors. And net income reached $26.4 billion, a 59% increase YoY. Furthermore, Nvidia's gaming segment continued to see strong performance driven by demand for its GPU hardware.

However, the earnings report missed expectations with its data center revenue, reaching $41.1 billion or a 56% increase YoY, which although is strong is slightly below expectations. In addition, Nvidia's China sales ceased due to U.S. export controls, leading to over billions of potential earnings losses. However, the company is actively working on acquiring licenses to resume sales to make a gain of $2-5 billion in Q3.

Nvidia stock subsequently fell by 3% in after-hours trading, reversing all gains made this week and pushing the stop farther away from all-time highs.

Nvidia, previously the undefeated quarterly earnings report champion, for the first time since its mild decline in November 2024 and August 2024 saw a massive investor backlash. Analysts like Baird, Mizuho, and Wells Fargo all anticipated a rise through their price target rises.

Nvidia is not alone, however. Earlier in the year, Tesla and Meta reported weak earnings reports leading to their stops stagnating after years of bullish growth. Analysts have compared recent weak performances to the 1990s dot-com bubble, and Bank of America warned that the Magnificent Seven stock dominance is over.

More investors have recently evacuated shares from the Magnificent Seven, leading to consecutive losses in the Nasdaq while the smaller-business-heavy Russell remained strong.