U.S. tech stocks have performed strongly in 2023, especially the seven tech giants of Apple, Microsoft, Google, Amazon, Meta, Nvidia and Tesla, which together have a market capitalization of more than $12 trillion, more than three times the size of Germany. With their innovation and leadership in software, hardware, cloud computing, artificial intelligence, and other fields, these companies have won the favor of the market and the confidence of investors. However, some analysts have also warned that the high valuation and high concentration of the U.S. technology sector may bring potential risks, and once there is a "black swan" event, it may trigger violent market volatility and correction.
According to Bloomberg, as of December 24, 2023, Apple's market capitalization reached 31 trillion dollars, Microsoft is 27 trillion dollars, Google is 21 trillion dollars, Amazon 1$7 trillion, Meta is $11 trillion dollars, Nvidia is 0$9 trillion, Tesla is $0$8 trillion. These seven companies account for nearly 30% of the S&P 500's market capitalization, a record high. This means that the performance of these companies has a huge impact on the direction of US stocks. So far this year, the S&P 500 has grown 27%, with technology stocks accounting for more than half.
Some analysts believe that the high valuations of U.S. tech stocks are justified because their fundamentals and profitability are very strong, and there is more room for growth driven by emerging technologies such as artificial intelligence. For example, tTim Murray, a capital markets strategist at Rowe Price, said the companies' return on equity was twice the U.S. average, indicating that their return on investment was very high. t.Dom Rizzo, technology portfolio manager at Rowe Price, believes that AI will be the biggest productivity booster in the global economy since electricity, which will benefit the performance of technology stocks.
However, some analysts pointed out that the high valuation and high concentration of U.S. technology stocks also bring some hidden dangers, such as the possibility that these companies may face stricter regulations, more competition, higher taxes, more litigation and other issues, which could affect their earnings and growth. Moreover, if there are some unavoidable "black swan" events, such as global political crises, financial crises, epidemic outbreaks, natural disasters, etc., these may break the balance of the market, trigger panic and sell-off among investors, and lead to a sharp increase in the U.S. technology sector.
Therefore, analysts suggest that investors should remain cautious and rational when investing in U.S. technology stocks, not blindly chasing higher, but making reasonable allocation and diversification according to their own risk appetite and investment goals. At the same time, we should also pay close attention to the dynamics and changes of the market, and adjust our strategies and opportunities in a timely manner to deal with possible risks and opportunities.