More than $500 billion in market value has been added to the four biggest US tech companies this week. Microsoft advanced 12% and is flirting with its best week in nearly eight years, while Alphabet is headed for its best weekly gain since 2021. Amazon.com, meanwhile, has jumped about 9% and Apple is up almost 5%.
“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,” said Sam Stovall, chief investment strategist at CFRA.
The idea that big tech is safer has fueled the investor rotation, especially as turmoil in the financial sector – sparked by the collapse of Silicon Valley Bank and Signature Bank – underlines the perception of risk elsewhere in the economy. The KBW Bank Index, which tracks 22 of the largest US lenders, sank 14% this week, adding to last week’s plunge that was its worst since March 2020. Meanwhile, the Nasdaq 100 Index has gained roughly 2.2% over that two-week stretch.
That divergence has fueled the biggest spread between the Nasdaq 100’s weekly gain and the S&P 500’s since the financial crisis in October 2008. The Nasdaq 100, which is tech-heavy and doesn’t have meaningful exposure to financial companies, has gained 5.9% this week, compared with the S&P 500’s 1.4% rise.
Major technology and internet stocks offer investors something close to stability in the current market, as their durable revenue streams and market dominance suggest they could be relatively insulated from any economic downturn. At the same time, 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.