As worries over a potential bubble in US technology megacap stocks persist, more voices on Wall Street are joining the chorus of reassurance.
The latest to downplay concerns are the analysts at JPMorgan Chase & Co., (JPM) highlighting that the valuations of the seven tech giants driving the market to new heights are presently lower compared to the average of the past five years.
Mislav Matejka, a strategist at JPMorgan Chase & Co., emphasized, “While there is a concern over the very strong outperformance of the Magnificent 7, we observe that the group’s current trading status is less stretched compared to previous years, thanks to robust earnings delivery.” He cautioned that while these stocks might not be entirely shielded from profit disappointments, they could still fare better in the face of general earnings downturns than traditional cyclicals tied to economic strength.
Echoing similar sentiments, analysts at Goldman Sachs Group Inc. noted last week that although market concentration is at its highest in decades, the top stocks trade at significantly lower valuations than during the peak of the tech bubble.
The Magnificent Seven — Apple Inc., (AAPL) Alphabet Inc., (GOOG) Amazon.com Inc., (AMZN) Meta Platforms Inc., (META) Microsoft Corp., (MSFT) Nvidia Corp., (NVDA) and Tesla Inc. (TSLA) — witnessed substantial gains in the S&P 500 last year. However, their performance has diverged recently, with Nvidia reaching record highs while Apple faced a technical correction amid concerns over declining iPhone sales and regulatory pressures.
Despite technology funds experiencing unprecedented outflows, strategist Michael Hartnett of Bank of America Corp. reiterated that technology stocks might still have room to rally.
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