Summary Big tech earnings season gets into full swing this week, with four of the Magnificent Seven (including Tesla, Microsoft and Apple) announcing results. Microsoft and Meta beat earnings expectations, Tesla misses. Shares volatile in after-hours trading. Apple’s latest results to follow tomorrow. Alphabet (4 February) and Amazon (6 February) earnings released next week; Nvidia’s earnings due on 26 February. TSMC and Netflix have already announced strong results, but market response has been tempered by inflationary expectations and concerns that US AI dominance could be under threat. Chinese AI start-up DeepSeek appears to rival OpenAI’s performance, with lower costs and using less advanced chips. Other companies announcing earnings this week include ASML and IBM. Follow for Microsoft, Meta and Tesla earnings expectations, as well as analysis and reaction. Refresh What could a tech selloff mean for your money? In the wake of the DeepSeek news, there is a real chance that disappointing earnings from any of the Magnificent Seven over the coming days could have a big, negative impact on their share price. That might not sound like a bad thing, particularly if you’ve never bought any of their shares directly. However, given their saturation of the stock market, you may well be more exposed than you realise. “UK investors might feel a million miles away from Silicon Valley, but their pensions and investment portfolios are probably brimming with US technology stocks,” says Laith Khalaf, head of investment analysis at AJ Bell. While these have served investors and savers well over recent years, and could continue to do so, “the recent wobble in stock prices stemming from DeepSeek’s new large language model highlights the risks to incumbents in the tech sector from the AI arms race that is currently underway”. These risks prompted the S&P 500 to fall 1.5% on Monday, thanks to its over-concentration in US tech megacaps. Given its size, most investors worldwide will have significant exposure to the index in their portfolios, but UK investors might be particularly heavily exposed to the Magnificent Seven. “The Global and North America fund sectors are two of the most popular destinations for UK investors, commanding £331 billion of assets under management, according to Investment Association data,” says Khalaf. A preference for passive rather than active funds will also have left UK investors particularly exposed: “an S&P 500 tracker fund now has a third of its portfolio invested in these seven companies. A typical global tracker fund has around three quarters of its portfolio invested in the US, and consequently just under a quarter of its portfolio invested in the Magnificent Seven,” Khalaf observes. In terms of ways to protect portfolios against this over-exposure, particularly in the event of a selloff, Khalaf highlights the use of active funds to avoid index over-concentration, choosing funds that offer US exposure without including the Magnificent Seven such as Artemis US Smaller Companies, or choosing an equal-weighted tracker fund such as the iShares S&P 500 Equal Weight ETF (LON:ISPE). These are potential diversification strategies – it’s certainly not the time to sell up entirely on the Magnificent Seven yet. “But the potential for upheaval as the AI race progresses might mitigate in favour of a more thoughtful, nuanced approach to investing in these companies,” says Khalaf. 2025-01-29T15:43:12.039Z