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Verizon Shares Take a Hit After Q1 Sales Warning
March 13, 2025
Goldman Sachs has issued a stark warning for investors in U.S. megacap tech stocks, particularly Nvidia and the so-called Magnificent 7, suggesting that the rallies in the Nasdaq 100 should be treated with caution. With Nvidia's stock falling by as much as 7% in a recent session, the firm believes the once-thriving AI trade is on the verge of a significant downturn. The shift in sentiment is largely driven by the bank’s assessment that the era of explosive growth for these tech giants may be coming to an end.
Since the introduction of DeepSeek, the market’s mood surrounding AI has fluctuated between optimism and skepticism. Goldman Sachs seems to have firmly embraced the latter, warning that the momentum that made stocks like Nvidia and its peers so successful is no longer as robust. In a series of reports released late last week and over the weekend, Goldman’s strategists emphasized that when a stock fails to rise in response to positive news, it’s a sign that trouble might be brewing. The earnings growth that had once been a defining feature of the Magnificent 7 is no longer as impressive as it once was.
The Shifting Dynamics of Tech Stocks
According to Goldman’s strategists, hedge funds have begun unloading their positions in the Magnificent 7 and other AI-linked stocks, signaling a broader pullback in the sector. As this selling pressure builds, there’s increasing concern that these once-popular stocks could face significant valuation resets in the near future. Paolo Schiavone, one of Goldman’s lead strategists, suggested that Nvidia’s recent earnings report marked a “clearing event” for the AI theme, with investors now shifting their focus to long-term growth projections for 2026 instead of the immediate future. Schiavone believes that any rallies in the Nasdaq 100 will likely be seen as opportunities for investors to exit rather than hold.
Tony Pasquariello echoed these sentiments, noting that the enormous earnings premium enjoyed by U.S. mega-cap tech stocks over the past few years is starting to shrink. He pointed to the deep market sell-off that Nvidia experienced, which saw the company’s market cap drop by $320 billion in a single day, as a sign of the growing pressure on the sector. Despite strong earnings, Nvidia’s stock price has been stuck in a range for the past eight months, a far cry from the explosive 24,000% cumulative return seen in the previous decade. This shift signals that the party may be over for these high-flying tech stocks.
John Flood observed that there has been significant de-grossing within U.S. technology, media, and telecom (TMT) stocks, with February seeing one of the largest reductions in net exposure to the Magnificent 7 since January 2021. The fall in exposure to these stocks suggests that institutional investors are increasingly cautious, especially as the sector’s once-robust earnings growth has begun to slow. The overall mood has shifted, with fewer investors willing to hold onto high-risk positions in these tech giants.
Mark Wilson added another layer to the analysis, warning that some of the largest stocks in the tech sector, like Nvidia, Apple, and Amazon, might be poised for consolidation after their substantial price increases and re-ratings over the past few years. Wilson’s charts, which track the EV-to-sales multiples of these companies, suggest that the rapid gains in these stocks might soon give way to a period of stability or even decline. While Amazon has not experienced the same dramatic re-rating as Nvidia or Apple, Wilson’s outlook still suggests a period of consolidation could be in store.
A Cautious Outlook for Tech and AI Stocks
In conclusion, Goldman Sachs' strategists are painting a picture of a cooling off period for the tech sector, especially for AI-driven stocks like Nvidia. With hedge funds reducing their exposure and market sentiment shifting, it appears that the explosive growth of the Magnificent 7 could be facing a significant slowdown. Investors should be prepared for potential valuation resets and should approach rallies in the Nasdaq 100 with caution, viewing them as liquidity events rather than signs of continued growth.
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Nvidia is experiencing a rough stretch, with its stock down over 7% and on track to close at its lowest point of the year. The chip designer, a leader in the graphics processing unit (GPU) market, has seen its share price take a significant hit, a stark contrast to the strong performance it saw earlier in 2025. At the moment, Nvidia's stock is trading at $117.60, showing a slight rebound of 1.67%, but the overall trend suggests a challenging period for the company.
The last major dip occurred in early February, following the debut of DeepSeek, when Nvidia's stock briefly hit an intraday low of $113.01 before recovering to close at $116.66. However, the company's struggles have continued, with analysts noting a marked shift in investor sentiment. Since mid-January, there has been a noticeable change in the options market, with an increasing ratio of puts to calls traded, signaling a growing bearish outlook on Nvidia’s future performance.
As the company faces increasing pressure, the trend in options trading reflects investor concerns about Nvidia's short-term prospects. This shift in sentiment is likely to fuel more questions about the company's ability to regain its previous momentum. While the chip sector remains a crucial part of the tech landscape, Nvidia’s recent struggles highlight the volatility that even market leaders can face in challenging times.
Nvidia (NVDA) is seeing a positive movement in premarket trading, a welcome shift for investors after a period of uncertainty leading into the release of its fourth-quarter earnings on Wednesday. The $3 trillion chipmaker had been struggling in the lead-up to this key report, but the recent uptick in its stock price offers a glimmer of hope for stock bulls. With the stakes now higher, the options market is indicating a possible earnings move of as much as 10%, reflecting increased anticipation surrounding Nvidia’s financial results.
The upcoming earnings report is particularly significant in light of recent market trends. Wall Street is watching closely to see if Nvidia can provide strong enough numbers and commentary to act as a "circuit breaker" for the broader stock market, especially momentum stocks that have been hit hard in recent sessions. If Nvidia’s results are solid, it could offer some much-needed relief to the market.
Broader Market Impact and Increased Focus on Nvidia
The focus on Nvidia’s earnings is growing, especially as the broader stock market has been under pressure. Deutsche Bank macro strategist Jim Reid noted that the S&P 500 has experienced its largest four-day decline since early September, with the Magnificent 7—Nvidia included—now in technical correction territory, down more than 10% since their peak in December. This downturn has heightened the importance of Nvidia’s earnings report, with many hoping for a strong performance to help stabilize the market and restore investor confidence.
As the market awaits Nvidia’s results, the spotlight is squarely on whether the chip designer can exceed expectations and provide a spark for a market recovery. The company’s fourth-quarter performance will likely set the tone for the tech sector, particularly in light of the broader sell-off that’s been affecting high-growth stocks. Investors will be closely monitoring the report to gauge whether Nvidia can deliver the kind of positive news that the market desperately needs right now.
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