According to reports, in the first quarter of 2023, large technology stocks to drive strong gains in the U.S. stock market, and shares of several well-known technology companies have seen the largest quarterly gains in recent years.
So far this year, large U.S. technology companies have benefited from several positive aspects. The banking sector turmoil has focused investors’ attention on the risk-averse nature of technology stocks. This is mainly because these companies have strong balance sheets, while revenue has remained stable in the economic downturn. At the same time, concerns about the banking sector have caused the 10-year U.S. Treasury yield to fall below 3.5% from a recent high of over 4%, easing the high valuations of technology stocks.
In addition, a large sell-off last year led to a significant decline in stock prices, making large technology stocks somewhat more attractive in relative terms. However, the gains so far this year have left valuations of major companies such as Apple and Microsoft above their long-term averages.
The Nasdaq 100 ended the quarter at its highest level since last August, up more than 20% from last December’s closing low, breaking through the lower line of the indicator representing a new bull market.
The following are four characteristics that represent U.S. technology stocks in the first quarter:
- The Nasdaq 100 index outperformed the broader market
The Nasdaq 100 index rose 20.5% in the first quarter, the largest quarterly gain since mid-2020. In addition, the index rose less than 14% in the unweighted case, indicating that gains were concentrated in the largest technology and Internet companies. Meanwhile, the financial sector accounted for a much larger share of the S&P 500 index rose only 7% in the first quarter.
2. Artificial intelligence boom to drive Nvidia shares soared
The three largest components of the Nasdaq 100 index are also the three largest stock gains in the first quarter. Tesla shares rose 69%. Meanwhile, shares of Meta rose 76%, the largest quarterly gain since 2013, as investors were bullish on the company’s big cost-cutting moves.
The biggest gainer in the Nasdaq 100 and S&P 500 was Nvidia. The company’s shares are up 90% so far this year, the largest quarterly gain since 2001. That reflects strong investor interest in artificial intelligence technology, and Nvidia’s chips are widely used in chatbots and other artificial intelligence applications. However, the stock’s surge has also brought concerns that Nvidia stock is overvalued.
- Skyrocketing value creation
So far this year, the Nasdaq 100’s gains have added more than $2.4 trillion to the index’s market capitalization, bringing the total to about $15.5 trillion, close to its peak of nearly $20 trillion at the end of 2021.
The performance of some of these stocks has been particularly interesting. Apple’s market cap fell below $2 trillion earlier this year but has now rebounded to $2.6 trillion. Microsoft’s market cap fell below $1.7 trillion at the beginning of the year but is now stable above $2 trillion as well.
Meta is still far from its market cap high of nearly $1.1 trillion in 2021, but its stock price surge in the first quarter has brought its market cap back up to nearly $550 billion, well above last year’s low of less than $240 billion.
4. The technical surface is optimized
So far this year, stocks have seen broad-based gains, with only a handful of Nasdaq 100 stocks showing double-digit percentage declines. This has led to an optimized technical picture. Currently, about 2/3 of the index’s components are trading above their 200-day moving averages. This compares to late September last year when less than 8% of the components were above their 200-day moving averages.