Investors are turning to technology and internet stocks in the wake of the recent dip in the US banking sector. The four largest US technology companies have seen over $560 billion in market value added this week, with Microsoft Corp. leading the charge with a 12% jump. Investors believe that big tech is a safer bet, and the turmoil in the financial sector has added to the perception of risk elsewhere in the economy. The KBW Bank Index has dropped almost 15% this week, on top of last week’s 16% decline, its worst since March 2020.
Major technology and internet stocks offer investors something close to stability in the current market. Their durable revenue streams and market dominance suggest they could be relatively insulated from any economic downturn. Additionally, their strong balance sheets, along with valuations that were heavily compressed in last year’s selloff, suggest less downside potential than other areas of the market.
The flight to technology and internet stocks is driven by the perception of safety in the tech sector, thanks to their strong balance sheets and market dominance. Meanwhile, the current uncertainty in the financial sector has highlighted the risks elsewhere in the economy. Tech stocks have emerged as a safer haven for investors, which is reflected in the market value increase they’ve experienced this week.
Why Investors are Flocking to Technology and Internet Stocks?
The recent dip in the US banking sector has prompted investors to seek solace in technology and internet stocks. As a result, the four largest US technology companies have seen over $560 billion in market value added this week, with Microsoft Corp. leading the charge with a 12% jump, its largest weekly increase since April 2015. The stock’s market capitalization has also surpassed $2 trillion once again.
Alphabet Inc. has also seen a surge of 12%, its most substantial weekly gain since 2021, while Amazon.com Inc. jumped 9.1% and Apple Inc. rose 4.4%. The Nasdaq 100, which is heavily comprised of tech stocks, saw a 5.8% increase this week, its strongest since November 2021, significantly outpacing the S&P 500 Index’s 1.4% increase. This outperformance marks the biggest one-week discrepancy between the Nasdaq 100 and the S&P 500 Index since the 2008 financial crisis.
Sam Stovall, Chief Investment Strategist at CFRA, said, “Tech is more of a safe haven than your traditional cyclical sectors, and it has already gone through a re-pricing, which means it looks attractive relative to the rest of the market.” Investors believe that big tech is a safer bet, and the turmoil in the financial sector has added to the perception of risk elsewhere in the economy. The KBW Bank Index, which monitors 22 of the largest US lenders, has dropped almost 15% this week, on top of last week’s 16% decline, its worst since March 2020.
Major technology and internet stocks offer investors something close to stability in the current market. Their durable revenue streams and market dominance suggest they could be relatively insulated from any economic downturn. Additionally, their strong balance sheets, along with valuations that were heavily compressed in last year’s selloff, suggest less downside potential than other areas of the market. “In addition to lower Treasury yields, which have improved tech’s intrinsic valuation, investors are already looking out to 2024, where tech’s prospects for earnings growth are positive,” Stovall said.
In conclusion, investors’ flight to technology and internet stocks has been triggered by the perception of safety in the tech sector, thanks to their strong balance sheets and market dominance. Meanwhile, the current uncertainty in the financial sector has highlighted the risks elsewhere in the economy. As a result, tech stocks have emerged as a safer haven for investors, which is reflected in the market value increase they’ve experienced this week.
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