ZACKS·2026-02-21 01:50Group 1 - Recent sentiment towards the Magnificent 7 and software stocks has been negative, leading to significant underperformance in these sectors, primarily due to concerns related to artificial intelligence developments [1][2] - The Magnificent 7 companies, including Amazon, Alphabet, and Microsoft, are recognized as AI leaders, but there are market concerns regarding their increasing capital expenditures, with Amazon planning to spend $200 billion in capital expenditures by 2026, up from $132 billion in 2025 and $83 billion in 2024 [2][3] - The anticipated peak in capital expenditures for 2026 may be premature, as management emphasizes the critical nature of these investments, which could lead to ongoing spending beyond initial expectations [3] Group 2 - Microsoft has seen a three-month performance decline of 15.5%, while the Magnificent 7 group as a whole has decreased by 2.7%, contrasting with the Zacks Tech sector's growth of 1.8% and the S&P 500's increase of 3.9% [4] - Total earnings for 427 S&P 500 companies that have reported are up 12.8% year-over-year, with revenues increasing by 8.8%, indicating a positive trend in overall market performance [6][18] - Nvidia is expected to report significant growth, with projected Q4 earnings of $1.52 per share on revenues of $65.56 billion, reflecting year-over-year growth rates of 70.8% and 66.7%, respectively [10][12] Group 3 - The Magnificent 7 group's earnings are projected to increase by 24.2% in Q4 compared to the previous year, with revenues expected to rise by 18.9%, following a previous growth of 28.3% in earnings and 18.1% in revenues in Q3 2025 [13] - The Magnificent 7 is expected to account for 25.5% of all S&P 500 earnings in 2025, up from 23.2% in 2024 and 18.3% in 2023, highlighting their growing influence in the market [17] - The overall earnings picture for the S&P 500 indicates double-digit earnings growth is expected in 2025 and 2026, suggesting a positive outlook for the market [28]