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Omicron May Make Megacap Tech Even More Expensive -Breaking

by Mike Robinson

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© Reuters. Megacap Tech May Get Even More Expensive With Omicron

(Bloomberg). Megacap tech stocks have been high-priced for years, and the new omicron coronavirus strain could make them more costly due to their defense capabilities.

According to strategists, the group could outperform if interest rate increases are delayed and more attention is given to shockproof stocks. This tech-rich area is home to Apple Inc (NASDAQ): And Microsoft Corp (NASDAQ:)., opened 1.5% higher on Monday, outshining the , after Friday’s brutal selloff.

Elsewhere, China’s growth-heavy Chinext Index jumped 1% on Monday, even though Asian stocks broadly extended losses. China’s Covid-zero strategy seems to be proving a boon for the gauge, which is dominated by technology and health-care names.

“I think big tech are the new defensives, with strong all-weather growth and fortress balance sheets, and given this their valuations are undemanding,” said Ben Laidler, eToro global markets strategist.

The evidence is overwhelming. Since the onset of the delta variant in late May, the NYFANG+ Index has risen 16%, outpacing a 9% gain for the S&P 500. For the NYFANG+ Index, the average forward 12-month price-to-earnings ratio is 46x, while it was 21x for the wider benchmark. Nvidia (NASDAQ) Corp. and Tesla (NASDAQ) Inc. are the most costly stocks.

Although falling U.S. bond yields bode well, it is difficult to predict a rally due to uncertainty over the omicron or sky-high valuations.

“With sentiment frothy, valuations extended, monetary policy tightening and bad Covid news accumulating … a market sell-off seems logical,” Citigroup Inc (NYSE:). Robert Buckland was the strategist and wrote a note.

Still, Buckland recommends buying the dip, as does Wedbush Securities Inc. technology analyst Daniel Ives, who sees “a clear buying opportunity given our bullish view of the tech sector set up into 2022.”

Tech Chart for the Day

 

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  • Meituan shares plummeted after a brutal antitrust probe and an investment surge. Alibaba A larger loss was caused by the (NYSE:) Group
  • China’s Covid-zero strategy seems to be proving a boon for its equities as global markets fret over the omicron coronavirus strain
  • Intel (NASDAQ.) is set to soon reveal details of major investments in Europe. This will mean that chip production in the EU could double by 2030.

(Updates prices in the second paragraph)

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