(New York) Long seen as risky and overpriced, tech stocks have shone since the onset of the banking crisis, to the point of now being seen as a safe haven for investors.
Meta, Alphabet and Microsoft have all gained more than 10% on Wall Street since the beginnings of the storm that swept through the American banking sector in early March, while, at the same time, the Dow Jones index dropped more than 2% .
“Investors see these big-cap tech stocks as a safe destination right now,” observes Angelo Zino of CFRA Research.
The label contrasts with the image long conveyed by the techno sector since the bursting of the internet bubble in 2000, that of an often overvalued sector, with very uncertain financial prospects, conducive to unpleasant surprises.
“Many have been crying ‘fire'” for months “about the tech sector, but the NASDAQ is up about 13% this year,” Dan Ives of Wedbush Securities said in a note. “Many investors who bet on the downside are trying to understand. »
“A significant part of the biggest companies in the world come from the techno sector”, recalls Scott Kessler, of Third Bridge, their massive capitalizations partially protecting them from the ambient volatility. “And they have tremendous financial flexibility and cash reserves,” which gives them a huge footing in turbulent times in the markets.
Also, unlike the turn of the 2000s, the digital world is now entrenched in our lives.
“People are not going to do without Windows or AWS (Amazon’s subsidiary dedicated to cloud computing) all at once, or stop doing research on the internet,” argues the analyst. From now on, the services offered by the behemoths of the net and IT “are seen as fundamental and necessary”.
“A Huge Cloud”
In addition to these structural elements, there are economic factors that have given new economy stocks an unexpected alignment of the stars.
Among the actors who converged on these values, according to Dan Ives, a significant number chose to desert the financial sector, “not knowing which bank was in crisis or what news was going to fall on a Sunday evening” on emergency measures.
The United States remains, in fact, weakened by the collapse of three banks in a few days, which has eroded market confidence in the financial system, even if the panic has been contained.
Those who made the trip found attractive valuations, due to the brutal correction that marked the tech sector in 2022, caused by the exit from the coronavirus pandemic and a forced monetary tightening cycle.
In addition, since the end of last year, “investors are entitled to what they expect (from the technological giants), that is to say savings plans”, underlines Angelo Zino.
Amazon again announced this week 9,000 job cuts, in addition to the 18,000 launched in January. A few days earlier, Meta had hit much harder still, bringing to 24% the reduction in its workforce since November.
“The general feeling vis-à-vis these big names has changed, due to the emphasis they have placed on efficiency” and the rationalization of their costs, judge Scott Kessler, a parameter which did not appear , so far, as an imperative because of their irresistible growth.
Last card in the game of technology stocks, the deceleration of the American central bank (Fed), whose cautious message on Wednesday prompted operators to count on an immediate end to monetary tightening and a series of rate cuts by the end of the year.
The scenario would be ideal for those who used to be called “GAFAM”, before Facebook became Meta and Google was taken over by Alphabet, because these groups, like the whole technology sector, depend on credit conditions to finance their development. fast.
“The rate hikes look over, which is dissipating a huge cloud over the industry,” confirms Dan Ives.
All values in the middle do not have the same prospects, nevertheless warns Angelo Zino, for whom “some more modest capitalizations will have more difficulty digesting the tightening of access to credit” linked to the turbulence that is going through the banking system. The crisis started with the bankruptcy of Silicon Valley Bank (SVB), a major fundraiser for young technology companies.
For these less established companies, he says, “we’re going to have to be more selective.”