This is a big week for big tech, with five of the “magnificent seven” reporting earnings amid increasing talk of bubbly valuations. There are now six members of the S&P 500′s trillion-dollar club, with Facebook parent Meta last week regaining a $1 trillion market capitalisation for the first time since 2021.
Last week was also good for Microsoft, which became a $3 trillion stock for the first time, just behind Apple.
Excluding Tesla – it lost over a quarter of its value in January, sinking again last week after earnings missed expectations – momentum is with the magnificent seven. Nvidia, up 27 per cent in January, continues to make stunning gains. Meta (up 13 per cent), Google parent Alphabet (10 per cent), Microsoft (9 per cent), Amazon (5 per cent) and Apple (5 per cent) have all advanced nicely in 2024.
It’s too much, says Vincent Mortier of Amundi, Europe’s largest money manager, who says big tech stocks are “close to a bubble”. That’s echoed by Richard Bernstein Advisors’ Dan Suzuki, who thinks we’re in tech bubble territory that will “eventually” result in a “reckoning”. Even market bull Ed Yardeni is concerned. He says the S&P 500 “may be starting a tech-led melt-up”, with “irrational exuberance” potentially inflating a dotcom-like “speculative bubble”.
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Bubble talk is arguably premature. Still, there are issues. Suzuki notes the top 10 S&P 500 stocks account for over 30 per cent of the index, the largest share in over 40 years. Mortier warns markets are not pricing in new competition or potential antitrust cases, saying “oligopolistic or monopolistic situations may not last forever”.
Microsoft and Alphabet report earnings after the close on Tuesday. Apple, Amazon, and Meta also report this week, with investors hoping stellar results will justify rising tech valuations.
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