The Unstoppable Rise of Tech Stocks
As I sit down to write this article, I’m reminded of the age-old adage: ’no one gets in trouble owning too many tech stocks.’ It’s a mantra that has been etched into the minds of investors everywhere, and for good reason. The last two years have seen the tech sector experience ‘magnificent’ gains, leaving many to wonder if they’ll be left behind if they don’t jump on the bandwagon.
A graph showing the dominance of tech stocks in the market
According to a recent note by Bank of America’s head US equity strategist, Savita Subramanian, the biggest increases in ownership from long-only active mutual funds over the last year have been dominated by tech stocks. In fact, nine out of the top 10 spots were taken by tech companies, with the outlier being Eli Lilly, a major player in the booming weight-loss drug market.
‘Within [tech], the number of ‘AI’ mentions on earnings calls was positively correlated with the change in percent of funds owning each stock.’ - Savita Subramanian
It’s clear that tech is having a moment, and AI is at the forefront of this revolution. Nobody wants to miss out on the next big wave, whether it’s PC, internet, phone, or Facebook. And with tech having enjoyed several of these moments in the last decade, it’s no wonder investors are clamoring to get in on the action.
A graph showing the correlation between AI mentions and stock ownership
The data speaks for itself: 68% of funds now hold Nvidia, the most popular stock on the list, and Broadcom saw the biggest increase in ownership, jumping from 26% to 45% in just a year.
But it’s not just the tech giants that are benefiting from this trend. ‘Old economy’ stocks are also seeing a boost, as companies begin to harness the power of AI to increase productivity and drive earnings.
A graph showing the increase in productivity due to AI adoption
As the market continues to feel narrow, with Big Tech getting positive earnings estimate revisions while the rest of the market struggles, it’s clear that investors are betting big on tech. And with AI-powered innovation driving productivity shifts, it’s likely that this trend will continue for some time to come.
A graph showing the dominance of tech stocks in the market
So, what’s the takeaway from all this? For investors, it’s clear: tech is where it’s at. And with AI leading the charge, it’s likely that this trend will continue to shape the market for years to come.
