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Investors have been piling into tech stocks at the fastest rate in 16 years, fuelling Wall Street’s rapid rebound from the rout triggered by Donald Trump’s “liberation day” tariffs in April, a closely watched survey of fund managers has shown.
Between April and July, allocations to the sector jumped by the largest amount since March 2009, according to a monthly poll by Bank of America.
The resurgence of tech shares — which bore the brunt of the April sell-off — is the latest sign that investors are brushing off Trump’s latest tariff threats and betting that the so-called “Magnificent Seven” will be able to continue to enjoy rapid growth in profits, which has seen them power the bulk of Wall Street’s gains in recent years.
“Big tech is back in the driver’s seat,” said Venu Krishna, head of US equities strategy at Barclays.
The tech-focused Nasdaq Composite index has risen more than 33 per cent from its April lows to record a series of record highs. Chipmaker Nvidia last week became the first company to reach a valuation of $4tn.
“Tech remains our favourite sector globally,” said Marija Veitmane, head of equity research at State Street, pointing to their “reliable strong earnings growth with high margins and strong cash flow generation”.
“No other sector can offer that,” she said.
Microsoft, Meta, Alphabet, Amazon, Apple and Tesla will all report second-quarter earnings over the next two weeks.
“We expect [big tech] to beat earnings expectations. The only question is, what is the magnitude of the surprise?” asked Krishna.
Technology stocks delivered a significant positive surprise in their earnings for the first quarter of this year, which helped share prices to rebound and break through their previous heights.
“Early on in the year, we did have greater concerns about the tariff and regulatory backdrop. But what we’ve seen recently has been pretty positive,” said Jessica Henry, investment director at Federated Hermes, referring in part to the Trump administration’s relaxation of curbs on chip exports to China this week.
“It’s bullish not only for Nvidia but for semiconductors and AI-related sectors more broadly. It’s a positive signal that indicates willingness from the US government to relax certain rules to ensure US tech competitiveness,” Henry said.
A net 14 per cent of the fund managers surveyed by BofA are now overweight the technology sector, up from a net 1 per cent underweight last month. Despite the resurgence, enthusiasm for the sector measured by the bank’s long-running poll remains below average.
“Valuation is the number one concern” about the tech sector, said Elyas Galou, investment strategist at BofA. Fund managers “realise they are buying one of the most expensive markets over the past 100 years”, he added.
The survey also suggested that fund managers remain wary of US assets more broadly, with a short position in the US dollar cited as the most crowded trade in markets. The currency has seen a significant devaluation this year so far, losing almost 10 per cent of its value compared to a basket of other currencies.
“Investors are emotionally bearish on the US, but they are not physically bearish,” Galou said. “They are bullish on tech, because of AI, but they are bearish on the dollar because of US trade policy and fiscal policy.”
For the previous three months until July, “long gold” had been considered the most crowded position by fund managers.
Nervousness around the dollar once again boosted sentiment towards the euro. Of the fund managers surveyed, a net 20 per cent of respondents were overweight the common currency — the largest proportion since January 2005.
A net 41 per cent of investors said they were overweight Eurozone equities, compared with a net 1 per cent in January.
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