Wall Street Sees Tech Stocks, Like Nvidia, Slip as Investors Turn to Small Caps
Wall Street is witnessing a shift in capital, with investors moving away from highly valued tech stocks, including Nvidia, according to analysts. David Konstin of Goldman Sachs warns that tech stocks, such as Nvidia, could continue to decline if they fail to impress in the coming earnings season.
Konstin attributes this rotation to several factors. Slowing inflation data, stable economic growth, and expectations of a Trump win in the US election have contributed to this trend. Additionally, the decreasing growth of large-cap stocks, like Nvidia stock, has also played a role. Nvidia's stock has been notably impacted by this shift.
However, Konstin remains optimistic about small caps. He believes that some capital flowing out of tech stocks, like Nvidia stock, is finding its way into smaller companies. This could be bolstered by continued economic growth, stable bond yields, pro-investment government policies, and a strengthening domestic market supported by positive consumer sentiment and trade policies. As risks decrease, smaller companies may benefit from increased merger and acquisition activity and improved economic conditions beyond the dominant large tech firms. Tom Lee of Morgan Stanley and Fundstrat shares this positive outlook on small caps.
In the coming weeks, the fate of tech stocks, such as Nvidia, hangs in the balance, awaiting their earnings reports. Meanwhile, small caps are poised to benefit from capital rotation and improving economic conditions, according to analysts like David Konstin.
