Big Tech's growth status is in question due to weaker sales forecasts.

Nov 6
The firm reported even higher profits than Wall Street anticipated, but the likelihood of a repeat performance in the fourth quarter has decreased. The majority of big tech companies are missing out on profits.

Investors have cause for concern over growth after companies like Apple Inc., Alphabet Inc., Meta Platforms Inc., and Tesla Inc., from Alphabet Inc.'s dismal cloud computing sales numbers to Apple's dampened Christmas expectations. One common thread across the group was caution.

Tesla voiced concern that the market for electric vehicles was starting to wane, while Meta Inc. issued a warning that the upcoming year appeared less predictable.
Even if the Nasdaq 100 stock index had its greatest week in a year last week, increasing 6.5%, investors are nonetheless concerned about that.

According to Advisors Asset Management CEO Scott Colyer, "It's all about the failure of future guidance." "Big tech stocks were priced to historical excellence, so investors were disappointed after these companies failed."

Right now, technology stocks are not doing well. The market values of the top seven IT giants have dropped by an average of 9% from their 52-week highs, with Apple alone witnessing a loss of over $300 billion.

Although the sell-off has lowered valuations, they are still high, and investors are hesitant to pay for the shares since future growth is less likely. Based on statistics from Bloomberg, the seven largest firms in the S&P 500 index are priced at an average of 31 times forward earnings, which is over twice as much as the other 493 equities in the benchmark.

As co-chief investment officer at Truist Advisory Services Keith Lerner noted, "The pressure on big tech companies is a sign that the S&P 500's correction is nearing completion, setting the stage for outperformance in the final two months of the year." Generally, it is an excellent time to buy stocks.

With rates stabilizing, conflicting economic data, and positive news regarding artificial intelligence, we are witnessing the strongest season yet for the market. We think we may see some investors chasing technology later in the year for fear of being left behind since many investors have underperformed, partly because they missed out on it earlier this year," he said.

After the Federal Reserve hinted on Wednesday that rising long-dated Treasury yields would lessen the desire to raise interest rates again, the S&P 500 index posted its best week of 2023 and recorded three consecutive monthly drops.

Though bond yields and tech stocks may continue to struggle in the upcoming weeks, this could damage money managers who have recently made their way back into US mega-caps as yields decline.

Max Wasserman, senior portfolio manager at Miramar Capital, stated that "things can change in the blink of an eye if there are economic or geopolitical shocks that directly impact stocks as a whole, without considering the dangers inherent in a concentrated market of technology companies." Thus, exercise caution when investing in mega-cap technology.

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