U.S. tech names no longer behaving as a "homogeneous block," BCA Research says

Published 01/08/2025, 12:58
© Reuters

Investing.com - A recent rally in tech stocks is becoming increasingly polarized, with names like Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT) outpacing even its "Magnificent Seven" mega-cap peers such as Apple (NASDAQ:AAPL), according to analysts at BCA Research.

In a note, the strategists led by Dhaval Joshi flagged that shares of Nvidia and Microsoft have surged to new all-time peaks almost 20% above their respective prior record highs. Apple, on the other hand, is "languishing" nearly 20% below its high notched in early 2025, they added.

"U.S. tech stocks and the so-called ‘Magnificent Seven’ are no longer behaving as a homogeneous block," they wrote in a note. Members of this club of tech giants, which also include Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA), Alphabet (NASDAQ:GOOGL), and Meta Platforms (NASDAQ:META), have largely outpaced the broader S&P 500 in recent years, fueled in large part by a boom in enthusiasm over the applications of artificial intelligence.

But the dispersion between some of these names has raised questions over whether U.S. tech can even be considered a "single sector," the analysts suggested.

One explanation for the trend could lie in these companies’ various prospects for AI, the analysts said, with the euphoria around the nascent technology becoming ever more narrowly concentrated in just a handful of stocks.

Nvidia, whose high-end chips have become integral cogs in the training of AI models, has long been viewed as a figurehead of the boom, while Microsoft’s partnership with ChatGPT-maker OpenAI has allowed it to take a perceived leap ahead of its tech industry rivals in the AI arms race.

But many observers have viewed Apple as a relative laggard in AI, with the firm’s capital spending plans hovering well below those of its nearest competitors. Apple’s shares have partially reflected these worries, slipping in the double-digits so far this year.

"[W]hen the largest company in the world, Apple, suffers a market value slump of 20 percent, equating to $0.7 trillion, it would usually spell trouble for the stock market. Yet the surge in the market values of the other tech superstars, Nvidia and Microsoft, has more than compensated for Apple’s loss," the BCA analysts noted.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.