Apple (AAPL) and Nvidia (NVDA) may be renewing their battle for the world’s most valuable company, but a challenging few months for the S&P 500’s (^GSPC) 10 largest companies are holding back the broader index.
The 10 biggest stocks in the S&P 500 have started to falter again relative to the rest of the market, RBC strategist Lori Calvasina rightly pointed out in a new note. These 10 stocks include Apple, Nvidia, Amazon (AMZN), Broadcom (AVGO), the two classes of Alphabet (GOOGL) (GOOG) stock, Micron (MU), Meta (META), Microsoft (MSFT), and Tesla (TSLA).
Their stutter step weighs on the overall stock market given their weight in the benchmark index.
Read more: How to protect your money during turmoil, stock market volatility
Calvasina said she remains on the sidelines with tech, which she downgraded to a Market Weight rating earlier this month.
Mounting investor skepticism about the timeline for AI return on investment has triggered severe rotation and pullbacks in megacap tech, preventing the broader market from breaking out.
Consider this: Former market leader Nvidia is down about 13% from its all-time highs, while Tesla is off by 26%. Double-digit declines relative to their highs are also in play for Amazon, Alphabet, Google and SpaceX.
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The latest earnings from Meta and SpaceX only fanned investors’ fears, with each reporting negative free cash flow and outlining aggressive AI spending plans.
Amid rising oil prices and portfolio de-risking ahead of November’s midterm elections, institutional investors have remained in a “wait-and-see” mode rather than chasing stocks near all-time highs.
“We’ve been max Overweight stocks and max Underweight sovereign bonds since mid-March. Given the constant narrative bingo we just can’t have the same level of conviction any longer. Heading into the mid-terms there may well be worries about AI regulation in the event of a ‘Blue Wave’ as well as renewed geopolitical concerns around the Middle East,” HSBC strategist Max Kettner wrote in a new note on Monday.
Kettner said he is moving to the sidelines on stocks near term.
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