By Martin Baccardax
U.S. stocks are on pace for their best set of monthly gains in more than five years, with big tech and semiconductor names powering major indexes higher and putting the S&P 500 and the Nasdaq back into record-setting territory.
But the outsize advance for Nvidia, which topped the $5 trillion mark in terms of overall market capital last week and extended its 2026 advance to 11.4% in early Monday trading, belies the nature of the so-called Magnificent Seven tech giants in driving earnings growth and propelling the S&P 500 deeper into record territory this week.
In fact, according to Fundstrat's Hardika Singh, we might be seeing the first change in broader market leadership in quite some time.
Removing Nvidia from the Mag Seven cohort, she argues, suggests earnings growth for the remaining six stocks of around 7.2% over the first quarter, a tally that falls well below the 10% gain expected for the remaining 493 stocks in the broader S&P 500 benchmark.
That's the first time since the fourth quarter of 2022, just before the full scale advance of OpenAI's ChatGPT, that the group is expected to underperform the market.
"The earnings leadership is instead expected to come from Micron Technology, Broadcom, and Sandisk" said Singh, adding that the "switch-up of fortunes suggests the start of a new era in the stock market, backed by earnings growth for the little guys."
First quarter earnings growth for the S&P 500 has improved considerably since the start of the reporting season, with LSEG estimates rising by around $17 billion.
With around a third of the benchmark reporting, analysts now see collective first quarter profits rising by around 16.1% from last year.
Savita Subramanian, Bank of America's chief U.S. equity and quantitative strategist, notes that while the ratio of weaker versus stronger forward earnings guidance has deteriorated somewhat over the first two weeks of reporting, "there have also been fewer mentions of 'weak demand,'" suggesting the sentiment change is "more likely driven by uncertainty tied to Iran than concerns over the current demand backdrop."
And, despite the slightly softer tone, she also notes that there have been no cuts to 2026 earnings forecasts as yet. A growth figure of 21.2% is penciled in for the three months ending in June, with a full-year gain of around 20.4% holding firm.
At the same time, the market has seen an astonishing rip of the PHLX Semiconductor index, a cap-weighted benchmark of the stocks that power the broader artificial investment trade.
The index has risen more than 44% since the end of March, crossing the 10,000 point threshold for the first time last week as part of an unprecedented 18 day run powered by Intel's record-setting advance and the broader fortunes of chip makers such as Broadcom, Advanced Micro Devices and Micron.
"Semiconductors have done much of the heavy lifting this quarter, and there's clearly powerful momentum behind the group, but even the strongest rallies need time to reset," said Bret Kenwell, U.S. investment analyst at eToro.
"At some point, semis will likely need a breather -- and investors are hoping megacap tech earnings can help carry the baton when they do."
And that raises the stakes considerably for the five megacap tech names -- Microsoft, Apple, Amazon, Google and Meta Platforms -- that will update markets with March quarter earnings over a two-day stretch starting Wednesday.
An index of the Mag Seven giants has gained around 15% so far this month, but the average price-to-earnings ratio of each stock is trading at around 29 times its forward earnings, putting it well ahead of the 21.5 times multiple for the broader S&P 500 and the 18.5 times multiple for the other 493 stocks in the benchmark.
The index is also up less than 1% since the end of last year, compared with a 15% gain for the Nasdaq and a 6.9% advance for the S&P 500, suggesting investors are learning to live without big advances in the biggest tech stocks.
"The concentration of hyperscaler results this week gives equities a clear near-term catalyst, particularly for semiconductors and selected software names, where positioning still leaves room for upside surprise, " said Bob Savage, head of markets macro strategy at Bank of New York Mellon.
"Absent a material worsening in energy supply conditions, technology can reassert leadership over energy, but conviction will depend on earnings delivery, the credibility of AI spending plans, and stable macro expectations," he added.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 27, 2026 13:38 ET (17:38 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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