Investors are seeking help from the volatility of the US stock market this week in shares of some of the most established technology companies where many startup businesses bank, following the collapse of California’s Silicon Valley bank. The collapse of SVB and two other US banks sent shockwaves across bond and equity markets while raising serious questions about the health of the banking system. But the biggest technology and semiconductor names are outperforming, according to FactSet data, helped limit losses on the Nasdaq 100, represented by the Invesco QQQ ETF QQQ, +0.07% , even as the S&P 500 erased all its gains for the year. till now. “There is a flight of quality in megacap tech names,” said Tom Forte, an equity analyst at DA Davidson who covers the technology space. Apple Inc. AAPL, -0.16% shares are up 1.6% since markets opened Monday, compared with a 1.3% gain for the Nasdaq Composite. Microsoft Corp. MSFT, +1.71% shares fared better, up 5% so far this week, while Meta Platforms Inc . is up nearly 8% over the same period, given a boost after announcing its latest round of layoffs. Netflix Inc. NFLX, +3.14% and Tesla Inc . Shares of TSLA, -2.75% both rose nearly 3%. Some hard-hit semiconductor names are also showing signs of life, including Intel Corp. Shares of 189300 are up nearly 8% over the past five trading sessions, +2.20% , while shares of Nvidia Corp. NVDA, +0.03% are up about 2.5%. %. To be sure, outperformance among technology names isn’t exactly a new phenomenon: Growth stocks have outperformed the rest of the market since Jan. 1, when the Nasdaq rose more than 7% to a 5% decline. For the Dow Jones Industrial Average DJIA, -1.19%. The riskier the tech name, the higher the performance, as speculative names with little or no profit to speak of have held up surprisingly well. The Arc Innovation ETF ARKK, -0.46% , seen as a benchmark for speculative tech names, is up more than 4% so far this week. But analysts see several factors that could help push the big tech names forward. Over the past 24 hours, traders in fed funds futures began pricing in 100 basis points in interest rates by the Federal Reserve before the end of the year. Analysts said this should be a boon for growth names. See: The Credit Suisse result upset Fed rate-hike expectations, with the absolute percentage of cuts seen by the end of the year “I think the main driver of the recent rally in technology companies has everything to do with changing expectations about interest rates. Interest rates can have a huge impact on the multiple you can give to fast-growing technology companies,” Art Hogan, B. said Riley Wealth’s chief market strategist. Hogan also pointed out that many of these companies saw their shares become extremely oversold in 2022, which has contributed to their recent bounce as traders have jumped to snap up shares at a discount. See: Meme-stock era record lows: Retail traders dumped $1.5 billion a day into U.S. equities in January Through 2022, the Fed’s aggressive interest-rate hikes sent megacap technology names reeling. Meta, Tesla and Netflix were hit particularly hard, as all three companies ranked among the 25 worst-performing S&P 500 names last year, according to FactSet. While megacap tech names like Apple, Meta and Alphabet are often referred to as technology giants, in reality, they span a variety of S&P 500 sectors, including consumer discretionary, which Amazon.com Inc. Heavily weighted toward AMZN, +1.35% . and Tesla, the information technology sector, home to Intel and Microsoft, and the communications services sector, Meta and Google parent Alphabet Inc. GOOGL, +2.34%. What’s more, big tech companies like Apple and Meta have relatively low debt burdens, lots of cash, reliable revenue streams and management teams trusted by Wall Street, Hogan added. “It also doesn’t hurt that Amazon and Apple have been among the best-performing stocks of the past decade,” Forte said. U.S. stocks DJIA, -1.19% SPX, -1.05% COMP, -0.38% fell sharply on Wednesday as fresh troubles at Swiss banking giant Credit Suisse helped revive concerns about how central banks’ rate hikes are affecting the global banking system. . The Fed has raised its policy rate by nearly 500 basis points over the past year.
