QQQ Volatile on Mixed Mag 7 Earnings, SMCI
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Equity investors were hoping for a grand slam on tech earnings this week but fell short like the New York Yankees as Mag 7 heavy hitters struck out.
The tech-heavy growth stock proxy, Invesco QQQ Trust ETF (QQQ), touched its all-time high Tuesday on hopes for a big earnings week before falling 3% through midday Thursday after Microsoft and Meta reported mixed results.
Although both mega-gap tech companies showed strong revenue growth in key areas, softness in Microsoft’s cloud division and Meta’s increased spending on metaverse projects raised concerns about tech’s high valuations and the sustainability of recent gains.
Investors were already cautious after Mag 7 stocks rallied throughout 2023 and 2024, so any suggestion of slower growth or higher costs can trigger profit-taking and market recalibrations.
With concerns over higher-for-longer inflation and interest rates continuing to create headwinds for high-growth sectors like tech, the reports led to some pullback as investors weighed future earnings potential against elevated price levels.
Tech’s last hope for a winning week will depend on how investors interpret Apple’s earnings, which were reported after Thursday’s close.
Super Micro Computer (SMCI) Stock Crash Drags on Tech
Compounding the tech sector’s problems in the past week, Super Micro Computer's stock (SMCI) price plummeted due to the resignation of its auditor, Ernst & Young (EY). EY cited concerns about the company's financial statements, raising doubts among investors about the accuracy of Super Micro's financial reporting.
This sudden development eroded investor confidence and triggered a sell-off, as SMCI dropped more than 40% in the past week, raising red flags about the broader semiconductor industry and tech sector.
Super Micro has announced it will provide a first quarter business update on Tuesday, Nov. 5, which is Election Day in the U.S.