For the most part, rising interest rates are negative for high-valued technology stocks. Higher interest rates make the present value of company future cash flows less valuable, and most technology companies are valued on the basis that a large chunk of their profits will come many years in the future. However, the higher interest rates are boosting the interest income for the biggest technology companies that carry higher cash balances and smaller debt.
According to Bloomberg data, the largest U.S. technology companies, including Apple (AAPL), Alphabet (GOOGL), and Nvidia (NVDA), entered Q3 with more than a half-trillion dollars in potentially high-yielding cash. Tesla (TSLA) last week said its interest income rose above $250 million in its most recent quarter after being close to zero for years, while Alphabet saw its interest income almost double to more than $1 billion. While the amounts are small relative to overall earnings, interest income offsets the narrative that rising interest rates are universally bad for loftily-valued technology stocks.
