The potential and risks of the strong price gains of US tech stocks: Analysis from a financial perspective

The potential and risks of the strong price gains of US tech stocks: Analysis from a financial perspective

According to a report from www.nzz.ch, the “Magnificent Seven”, the seven largest tech companies in the USA, are experiencing strong share price gains. Microsoft in particular stands out for its involvement in Open AI, which gives the company a head start in monetizing AI. The markets' confidence in an ideal scenario and lenient central banks is leading to new records on the stock exchanges. However, the gains are raising concerns among some market observers, who are warning of a possible bubble. The concentration of the “Magnificent Seven” in the stock indices also poses a risk, as possible weakness in tech stocks could negatively impact the entire index.

The strong advances of the “Magnificent Seven” have led to the shares of the seven largest tech companies in the USA being heavily overvalued. The ratings are high, but not completely unrealistic. Analysts at Bank of America have calculated that shares could rise another 55 percent to reach the valuation levels of the seven largest tech stocks before the dot-com bubble burst. Despite warnings of a possible bubble, companies like Apple and Microsoft have very positive financial prospects, with strong revenue growth and huge cash reserves.

The high concentration of the “Magnificent Seven” in the stock indices poses a risk, especially when tech stocks show weakness. The disproportionate influence on the indices can lead to strong market movements. Despite this, investors show little sign of abandoning the stocks for diversification reasons as the Magnificent Seven are also viewed as safe havens. It is important to closely monitor the developments of tech mega-caps as their price movements can have a significant impact on the overall market.