Stocks to watch this week: Tesla, Microsoft, Alphabet and Amazon

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As the second-quarter earnings season approaches, key companies worldwide will provide insights into sector performance. Investors will be particularly focused on updates from some of the 'Magnificent Seven', which will reveal whether the artificial intelligence (AI) trend continues.

The Mag 7 stocks have endured a challenging period, with the S&P 500’s (^GSPC) major players—Nvidia (NVDA), Microsoft (MSFT), Google (GOOGL), Tesla (TSLA), Apple (AAPL), Meta Platforms (META), and AmazonAJa (AMZN)—experiencing a dramatic decline in market capitalisation. Over recent sessions, these tech giants have collectively shed $1.128tn in market value, marking the largest such loss since May 2022.

Will the upcoming earnings reports show strong performance or a lack of momentum? Here’s what to watch for:

Tesla (TSLA) — Reports second-quarter results on Tuesday 23 July

Tesla shares have experienced a dramatic surge this month, with the company's stock price surging by 33%. This increase has propelled Tesla's market valuation by $209bn in the first eight trading days of the month alone, surpassing the combined market value of European automotive giants Mercedes-Benz, Volkswagen, and Stellantis, which stands at $198bn.

This surge cannot be attributed to Tesla’s first-quarter financial results, which revealed the lowest quarterly profits since Q2 2021, diminishing cash flow, and rising inventory levels. The second-quarter production and delivery figures, released earlier this month, indicated a 14% year-on-year decline in vehicle production and a 5% drop in unit sales, although this may have contributed to reducing some of the inventory backlog.

“Quite what inspired this romp is hard to divine, barring ongoing investor enthusiasm for companies that are perceived as AI (and autonomous driving) plays, Elon Musk’s courtroom victories at Tesla and X and ongoing hopes surrounding the Cybertruck, the supercharger network and the ride-hailing app,” Russ Mould, investment director, Danni Hewson, head of financial analysis, and Dan Coatsworth, investment analyst, all of AJ Bell, wrote.

Read more: How to invest in AI as the rally continues

For the third quarter, the current consensus is sales of $25.7bn and that would signify a return to growth in the top line of some 10% year-on-year.

Analysts and investors are also paying close attention to Tesla’s revenue composition. In the first quarter of 2024, energy storage, energy generation, and other business lines contributed 19% to total revenues, up from 10% in the same period in 2022.