Mag 7 stocks enter correction territory as Nvidia drops 4%

The "Magnificent Seven" stocks closed Tuesday in correction territory, with the group falling more than 10% from its recent peak. Nvidia led the decline, dropping 4.13% to $200.04, its lowest close in three months.

A correction is defined as a 10% or greater pullback from a recent high. The Mag 7, Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla, had been riding a wave of AI-related optimism since late 2023. That wave broke this month on a combination of trade-policy uncertainty and growing skepticism about the pace of AI monetization.

Nvidia's slide accounted for roughly one-third of the group's index-level losses. The chipmaker's NVDA stock page shows an Alpha Score of 65 out of 100, a "Moderate" rating that reflects the stock's elevated valuation against a deteriorating macro backdrop. At $200, Nvidia trades at 28 times forward earnings, down from 35 times in January. The multiple remains above its five-year median.

Apple fell 2.8%, extending its year-to-date decline to 8%. Alphabet lost 3.2% after a report that the European Union is preparing to force the company to sell parts of its ad-tech business. Tesla dropped 6.5%, hitting a fresh low for 2025. Analysts cut delivery estimates on weaker Chinese demand.

The catalyst for this week's selloff was a Bloomberg report Monday that the White House is considering a 20% tariff on semiconductor imports. The tariff would directly raise costs for Nvidia and other chip designers that rely on overseas fabrication. The report landed as the market was already positioned for a pullback. Net long positions in the Nasdaq 100 futures had reached a two-year high in early February, according to CFTC data. That crowded trade unwound fast once the tariff news hit.

What makes this correction different from the August 2024 shakeout is the breadth. Then, the Mag 7 dropped 12% while the Russell 2000 was flat, a classic rotation trade. This time, the Russell 2000 is down 9%, and the equal-weight S&P 500 is off 6%, suggesting a broader risk-off move that is not confined to megacap tech.

For Nvidia, the next catalyst is its fiscal fourth-quarter earnings report, scheduled for Feb. 26. Consensus expects revenue of $38.5 billion, up 72% from a year earlier. The stock's recent price action suggests investors are already discounting a beat. The question is whether guidance for the current quarter can sustain the growth narrative. The company's Blackwell GPU ramp is on track, according to supply-chain checks. Any sign of order delays or customer pushback could deepen the correction. Options markets are pricing a 4% implied move for the report. A miss would likely accelerate the selloff. A strong beat could provide a relief rally, though the tariff cloud could mute any upside.

The 10-year Treasury yield has risen 80 basis points since December, driven by stronger-than-expected jobs data and sticky inflation. Higher yields increase the discount rate on future earnings, hitting high-valuation stocks like the Mag 7 hardest. At 4.85%, the yield presents a headwind for a group that trades at an average of 30 times next year's earnings. The Mag 7's average forward PE is roughly double the S&P 500's, leaving little room for disappointment. If yields stay near current levels, the group may need to deliver earnings growth that exceeds already high expectations.

The next data points are Thursday's weekly jobless claims and Friday's January retail sales. A strong report could push yields higher and pressure growth stocks further. A weak report could revive hopes for a Fed rate cut in June. Either way, the correction has not yet triggered the kind of panic selling that marks a bottom.