Market sentiment towards the Magnificent 7 and software stocks has been weak, linked to AI-related concerns. For the Mag 7, the focus is on rising capital spending, while software firms face the risk of AI replacing some of their products.<\/p>\n
Amazon\u2019s planned capital expenditure is $200 billion in 2026, up from $132 billion in 2025 and $83 billion in 2024. In 2025, Amazon\u2019s operating cash flows slightly exceeded its $132 billion capex, but 2026 capex is expected to exceed operating cash flows.<\/p>\n
Over three months, Microsoft is down -15.5% versus the Mag 7 at -2.7%, the Zacks Tech sector at +1.8%, and the S&P 500 at +3.9%. Nvidia reports Q4 results after the market close on Wednesday, February 25th.<\/p>\n
Nvidia revenue was $16.67 billion in 2021 and is expected to reach $312 billion next year (fiscal year ending January 2027). For Q4, estimates are EPS of $1.52 on $65.56 billion revenue, up +70.8% and +66.7% year on year.<\/p>\n
For Mag 7 Q4, earnings are expected to rise +24.2% on +18.9% higher revenue, after 2025 Q3 growth of +28.3% earnings and +18.1% revenue. The group is forecast to deliver 25.5% of S&P 500 earnings in 2025, versus 23.2% in 2024 and 18.3% in 2023, with a 32.7% index weight; Technology is 41.8% and Finance is 12.6%.<\/p>\n
By Friday, February 20th, 427 S&P 500 firms (85.4%) had reported, with earnings up +12.8% on +8.8% revenue. Of these, 75.2% beat EPS estimates and 72.4% beat revenue estimates, with more than 700 companies due this week, including 53 index members.<\/p>\n
With Nvidia reporting in two days, the market is on edge. We are seeing a clear split in the Magnificent 7, where heavy AI spending at companies like Microsoft and Amazon is causing investor concern, leading to their recent underperformance. This environment makes Nvidia\u2019s results on February 25th a critical moment for the entire tech sector.<\/p>\n
Implied volatility for Nvidia options expiring this week has surged past 120%, indicating traders are pricing in a very significant price move in either direction. This level of expected movement suggests strategies like straddles or strangles could be considered, though the high premiums make them expensive. We have seen the VIX, a measure of market fear, climb from 14 to over 18 in the last two weeks, reflecting broader anxiety.<\/p>\n
The core issue remains the massive capital expenditures required for AI infrastructure, which is spooking investors who question the timeline for monetization. Last week’s hotter-than-expected Producer Price Index (PPI) report only added to these worries, as higher financing costs make these multi-billion dollar projects even more expensive. This is a stark reminder of the late 1990s, when huge investments in infrastructure were made long before profits were realized.<\/p>\n
Given the high cost of buying options, traders might look at vertical spreads to define risk and lower entry costs. For those bearish on the big spenders, buying put spreads on an index like the QQQ could offer a hedge against a negative reaction that spills over from the Magnificent 7. We’ve seen the put-to-call ratio on the tech-heavy index tick up to 1.15, suggesting a growing defensive posture among traders.<\/p>\n
Even if Nvidia delivers a strong report, it may not calm the market’s deeper fears about profitability among its biggest customers. The recent downward revisions for Q1 2026 earnings estimates show that concerns are already shifting beyond the last quarter’s results. Therefore, any rally on a positive Nvidia surprise could be seen as an opportunity to establish hedges against the ongoing capex concerns.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Weak AI sentiment hits Magnificent 7, software; Amazon capex soars; Microsoft lags; Nvidia results loom; S&P earnings rise.<\/p>\n","protected":false},"author":62,"featured_media":16992,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42551","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42551"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42551\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16992"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}