The so-called Magnificent Seven technology companies that have powered this year’s US stock rally are posting disappointing earnings, wiping about US$386 billion off their market value and threatening to push the S&P 500 into a correction.

Google owner Alphabet Inc, Tesla Inc, Facebook parent Meta Platforms Inc and Microsoft Corp have all slumped since reporting, with the latter dragged down in Thursday’s rout.

Amazon.com Inc wavered in extended trading after posting results. The remaining two - Apple Inc and Nvidia Corp - are due to report next month.

The seven companies have been the story of the year in the stock market, with a frenzy of interest around artificial intelligence fueling gains for many of them. The optimism is waning because of higher interest rates and war in the Middle East - the S&P 500 has fallen 9.8% from its 2023 peak, putting it near the 10% drop that’s defined as a correction in a bull market.

Yet there’s still plenty of euphoria left. The tech-heavy Nasdaq 100 Index, dominated by the Magnificent Seven, remains up 29% for year, meaning there’s plenty of room for the market to fall. 

Meta’s results weighed on the market Thursday. The stock fell 3.7% after the social media giant dashed investors’ hopes for a long-term advertising recovery, saying it was at the whim of an uncertain economic environment.

This comes on the heels of Alphabet erasing almost US$180 billion in market value on Wednesday after the company’s cloud unit reported a smaller-than-expected profit. The loss was the biggest single-session market value wipeout for the search giant. Earlier in the month, Tesla’s value shrank by US$72 billion in one day after its results.

The only glimmer of hope among the big seven, Microsoft, was dashed Thursday. The Windows software maker slipped, reversing an earlier rally that had added about US$75 billion in market value on Wednesday, after the software giant reported first-quarter results that beat expectations. 

Alphabet and Microsoft, which both trail Amazon in cloud infrastructure, have been racing to build up their AI offerings as a way to make their platforms more enticing to customers. Their diverging sets of results raise the bar for cloud computing leader Amazon.

  - Bloomberg