LIVE MARKETS-Tech Trade: A Pause or a Pivot?
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TECH TRADE: A PAUSE OR A PIVOT?
Is the tech trade running out of steam, or just catching its breath? Bernstein analysts say the answer lies somewhere in between.
Despite the "generational" AI boom, tech barely outperformed the broader market in H1 2025 — just over 70 basis points (bps) on a cap-weighted basis.
"We have to go back to 2013 to find a time when Tech's performance deviated less than 100bps from the market in a 12-month period," the analysts wrote, calling it a "historically soft stretch" for a sector that once led the charge.
But the story changes when you strip out the underperformers.
Excluding Apple and Google, both viewed as 'AI laggards,' tech outperformed the market by over 690bps, Bernstein noted.
Apple AAPL.O is down 14.5% YTD, while Alphabet GOOGL.O is up 1.7%, underscoring the divergence even among tech's biggest names.
The real juice came from eight AI leaders, including Nvidia NVDA.O, Microsoft MSFT.O, and Meta META.O, which accounted for nearly all of Tech's outperformance and delivered a staggering 1200bps edge.
Still, the sector's dominance is raising eyebrows.
Tech now makes up 43% of the top 1500 U.S. stocks—its highest concentration ever—while the top 10 tech stocks account for nearly 80% of the S&P 500 Information Technology Index's .SPLRCT market cap, Bernstein noted.
Despite this dominance, the sub-index is up just 13.3% YTD.
Bernstein holds a marketweight rating on the tech sector for H2 2025.
"Still-elevated valuation, weaker-than-historical growth outlook, and the risk of a digestion period in AI prevent us from recommending a strong overweight in tech," they said.
(Rashika Singh)
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