News

For a long time, nothing could stop the rise of US technology stocks: neither geopolitical tensions, higher inflation, nor the presidential election campaign. However, a market correction has now set in. Is this the end of the boom? “Not at all,” says Carsten Gerlinger, Managing Director and Head of Asset Management at Moventum AM. “Artificial intelligence is the future, and this future has just begun.” The current phase of weakness is more of a buying opportunity.

Not only has the stable US economy surprised many in recent months, but Wall Street has also been full of surprises: since fall 2023, it has surged at a breathtaking pace, with the S&P 500 index breaking nearly 40 records by July. The driving force has been companies in the information technology and communications services sectors, particularly big techs like Microsoft and Nvidia, which have been fueled by expectations around artificial intelligence (AI).

While the technology index Nasdaq 100 gained nearly a fifth from the beginning of the year to mid-July, chip manufacturer Nvidia saw an increase of around 180 percent, the stock of Facebook parent Meta gained more than half, and Amazon’s value rose by a third. Apple and Microsoft each increased by a quarter, both companies now worth over three trillion dollars. Nvidia, Alphabet, and Amazon surpassed the two-trillion-dollar mark. The relentless rise raised concerns that valuations were now overstretched and a correction was due.

This correction began in mid-July. Company results cast doubt on whether the massive investments in AI would pay off in the short term. By the end of July, the Nasdaq index was about six percent below its high. But Gerlinger is confident that this is not the end of the tech rally: “There have been phases of weakness in this segment in recent years – always with the same question about the appropriateness of stock valuations. Yet every time, this question was ultimately answered with no.”

“US tech companies are very innovative,” says Gerlinger. “They set the global trend and drive US economic growth.” The megatrend of AI will continue to shape the future, even beyond the major market players, as the benefits of AI gradually reach a wide range of companies. “With the massively improved performance of the latest generation of AI processors, the costs for deploying AI in companies have drastically decreased,” Gerlinger explains. This makes the efficiency-boosting tool AI available to many firms, which ensures growing demand for technology companies. “The recent price declines are therefore more of a signal that could encourage stock purchases,” says Gerlinger.

There is indeed some risk from the political side. J.D. Vance – who would become Vice President if Donald Trump wins – announced plans to break up major tech companies. “But it remains to be seen whether he will even survive the campaign politically,” says Gerlinger.