Apple (AAPL) and Microsoft (MSFT) alone now account for close to half of all money flowing through the technology sector while the rest of the Top 10 stocks in the space barely stack up to Microsoft . . . and we’re talking about multi-hundred-billion-dollar empires here. How are these “niche” names holding up this season?
Keep in mind that the intricacies of classification create some optical illusions. Amazon (AMZN) and Tesla (TSLA) are officially consumer companies, no matter how many computers they run or how advanced their systems are. Alphabet (GOOG), Meta (META) and even Netflix (NFLX) are communications stocks.
“Technology” today doesn’t mean you came out of the dot-com crucible or even Silicon Valley. It just means you sell hardware or software . . . or run a network like Visa (V) and MasterCard (MA).
They did all right, by the way. I’ve already talked a little about Visa giving us the solid growth we used to get from PayPal (PYPL), which, frustratingly, is technically a pure financial stock at the moment. The establishment is expanding faster than the upstart. That’s not a great sign for the financials, but V shareholders don’t mind.
MA isn’t a slouch either. Revenue up 20%, earnings per share up 13% . . . again, the kind of numbers we demand from PYPL. Stick with the big networks until the competitive map shifts. After all, they even pay dividends, confident in their market position.
And then you have the chip makers. Old Intel (INTC) did miserably, but it isn’t really a factor in the sector any more in terms of market weight. NVIDIA (NVDA) is three weeks away. A miss could move the market and expectations are fairly high.
NVDA needs to hit at least 20% growth to keep Wall Street happy. Down the food chain, Broadcom (AVGO) comes out early next month, but last quarter’s numbers were good enough to inspire a little confidence.
Play your cards right and you’re riding a 40% growth ramp on AVGO. The stock is up “only” 12% in the last 12 months, so it’s gotten a lot cheaper on a fundamental basis. You can get it now for barely 14X anticipated current earnings . . . or under 13X if you’re looking out toward next year. Thanks, Fed!
Adobe (ADBE) and Salesforce (CRM) are also traditional laggards in the cycle, but down this far in the chain their results are unlikely to move the market. CRM in particular desperately needs to turn its trend around. If it can’t, the stock looks precariously rich. ADBE is also working off the stigma of a weak year.
Finally you have Accenture (ACN), the classic “IT” company, which reports in late September. That’s practically the start of the next cycle, shedding more light on what’s going on in the tech environment now in the current quarter . . . and not so much about the past.
That’s when I’ll start paying attention. For now, “tech” has already dodged a big dread bullet. The trillion-dollar giants did okay. Beyond them, while the smaller companies matter to shareholders, the needle doesn’t really move.