The technology sector, a major driver of recent stock market gains, has been downgraded by the Chief Strategist and CIO of Truist, Keith Lerner. This move comes amid fears of overvaluation and the resulting recommendation to invest in alternative sectors.
Get notified with the latest news, articles and more!
Follow up
What happened
Lerner recently downgraded the tech sector from overweight to neutral, citing concerns about its current valuation. The move comes after the sector outperformed the market by 11% last month, Business Insider reported Monday.
Lerner, however, remains optimistic about the long-term prospects of the technology sector, particularly in the field of AI.
“There will likely be a better opportunity to deploy capital in a meaningful way and we will look for a better entry point to upgrade the business going forward,” Lerner wrote in the note.
Truist is now shifting its focus to sectors that are indirectly benefiting from the AI boom, such as communications services and utilities. These sectors are seeing increased demand due to investment initiatives in 5G network infrastructure and data center energy consumption.
This turnaround comes as U.S. tech stocks, including Nvidia, have seen huge gains this year. Nvidia is up 156.47% since the beginning of the year. Meanwhile, the “Magnificent Seven” tech stocks – Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), NVIDIA Corp (NASDAQ:NVDA), Meta Platforms Inc (NASDAQ:META), Tesla Inc (NASDAQ:TSLA), Amazon.com Inc (NASDAQ:AMZN), e Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) – have increased by about 57% in the last year.
Because it is important
Truist’s downgrade comes at a time when there are mixed signals about the future of the technology sector. Dan Ivesanalyst of Wedbushrecently predicted a 15% surge in tech stocks in the second half of 2024, driven by expanding AI use cases. Ives believes the tech bull market has some longevity, suggesting the current AI boom is far from over.
However, not everyone shares this optimism. The economist Harry Dent warned of an impending market crash, predicting that the S&P 500 could fall by 86%. Dent’s cautious stance highlights the potential risks of the current market environment, which he believes is in an “everything” bubble.
To increase the complexity, Goldman Sachs forecast a flat return for the S&P 500 for the rest of the year, suggesting that the market may have already peaked. This contrasts with the more optimistic views of analysts such as Ives and Gene Munsterwhich predict a three- to five-year AI-driven bull market.
For further updates on this topic, add Benzinga Italia to your favorites or follow us on our social channels: X e Facebook.
Get exclusive information on market movements 30 minutes before other traders
Benzinga Pro’s 14-day free trial, available in English only, gives you access to exclusive insights so you can receive actionable trading signals before millions of other traders. CLICK HERE to start your free trial.
Immagine tramite Shutterstock
