Are Investors Too Overweight Tech Stocks?

According to a Bank of America fund manager survey, investors are the most overweight they have been in the technology sector since December 2021, with 60% of respondents saying being long big tech as the most crowded trade.  A Bank of America analysis of Q2 filings shows that 20% of stock funds had more than 40% of their assets in the seven biggest technology companies.  The seven stocks accounted for 29% of active funds’ weight in S&P 500 companies, 150 basis points higher than their weight in the index. 

Investors have been flocking into technology stocks as growth in both earnings and revenue is expected to outpace the overall market next year.  However, this week’s weakness in Apple (AAPL) and its suppliers due to China’s ban on iPhone use in government-backed agencies and state companies are questioning if recent strength in the sector can continue.  BNP Paribas said, “Where tech goes is going to be where the U.S. equity market goes.  Tech has shown such strong leadership that if it rolls over, it’s going to be very, very challenging for the market to perform.”