Nvidia Corp. put a bow on a better-than-expected earnings season for Big Tech last week by delivering a strong outlook for revenue, despite US restrictions on sales of its chips in China. With Nvidia and Microsoft Corp. rallying back to the cusp of record highs, traders are betting the group is poised to lift the broader market.

“I feel really good about tech coming out of this earnings season,” said Brett Ewing, chief market strategist at First Franklin Financial Services. “There’s still more gas in this tank.”

The S&P 500 Index is within 4% of its February record high with much of the rebound being fueled by easing tensions between the US and its trade partners, as well as Big Tech results that showed demand for things like cloud-computing services, software, electronic devices and digital advertising remain intact even as the threat of higher tariffs on sales lingers. 

Tesla Inc. is up 56% since the benchmark bottomed out on April 8, while Nvidia and Microsoft have gained 40% and 30%, respectively.

As a result, a Bloomberg gauge of the so-called Magnificent Seven stocks — Nvidia, Microsoft, Tesla, Apple Inc., Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc. — is outperforming the S&P 500 over the past eight weeks — a critical shift for the benchmark considering the group accounts for a third of the index. The cohort is responsible for nearly half of the S&P 500’s 19% rally from the April bottom, according to data compiled by Bloomberg.

Despite the strong performance, the group is still trailing the S&P 500 for the year — a rare occurrence in the past decade. Shares of Apple and Amazon, which face greater risks from tariffs due to products imported, are weighing the cohort down and lag the overall market. 

“Buying the tech dip will be a theme throughout the year,” said Ewing. “There’s still a lot of money on the sidelines and it has to be put to work.”

Recovery Risks

Tariffs and other Trump policies remain a big market overhang. On Friday, the benchmark sank more than 1% after Trump accused China of violating an agreement with the US to ease tariffs and a news report that the US plans to place broader restrictions on the country’s tech sector. The S&P 500 managed to recoup most of those losses by the end of the day.

Another hurdle will be Big Tech’s hefty valuations. Bloomberg’s Magnificent Seven gauge is priced at 30 times projected profits, according to data compiled by Bloomberg. Meanwhile, the S&P 500 is trading at 21 times earnings projected over the next 12 months, up from a low of 18 times in April and well above the average of 18.6 times over the past decade.

Barry Knapp, managing partner at Ironsides Macroeconomics, said he’s wary of Big Tech’s rich valuations even though the group looks attractive from a fundamental perspective. He’s “modestly underweight” the sector and has relatively more exposure to industrials, materials, energy and financials in anticipation of a capital spending recovery in the second half of the year. 

“Being overweight on tech here borders on recklessness, because you would have such a huge proportion of your portfolio in this one sector, and that leaves you vulnerable,” Knapp said.

Market Catalyst

Truist Advisory Services’ Keith Lerner, however, sees Big Tech leading the broader market higher in the last half of 2025 with spending on artificial intelligence computing continuing to climb.

Meta Platforms raised its forecast for capital expenditures this year and Microsoft said it plans to increase spending in its next fiscal year, alleviating concerns that the companies might pull back on such outlays after two years of largesse. 

“Our view is that earnings could still be maybe flatter but likely have less downside than what we would have thought heading into the earnings season,” said Lerner, who is Truist’s co-chief investment officer and chief market strategist.

The Magnificent Seven profit estimates in 2025 have stayed steady over the past two months. The group is projected to deliver profit growth of 15%, roughly in-line with analysts’ expectations before the reporting season began in mid-April and twice the expansion projected for the S&P 500, according to data compiled by Bloomberg Intelligence.  

“Investors are going to be drawn back toward these names with secular growth,” said Lerner. Tech “could be that catalyst later on to actually see the market re-accelerate later in the year.”