Technology (XLK) is once again at the forefront of market momentum, leading sector gains over the past month as investors pile back into growth. Wall Street strategists say the AI-fueled rally still has legs, arguing that even at these elevated levels, Big Tech remains cheap.
“US equities in general, and tech stocks in particular, are still below their peak of earlier this year, so there is arguably room for the relief rally to continue,” Capital Economics’ John Higgins wrote in a note to clients on Thursday.
Over the past week, the megacap-heavy Nasdaq 100 (NQ=F) returned to record highs, with chipmaker Nvidia (NVDA) now nearing a $4 trillion valuation after logging back-to-back all-time closing highs.
That momentum has helped propel the “Magnificent Seven” stocks back into a leadership position, fueled by stronger-than-expected earnings, easing macroeconomic fears, and continued investor enthusiasm over artificial intelligence.
“Some of these megacaps don’t look that expensive to me relative to the growth potential,” Jordan Klein, tech analyst at Mizuho, told Yahoo Finance, pointing to Alphabet (GOOG, GOOGL), Amazon (AMZN), and Meta (META) as names that still offer value at current levels.
Meanwhile, Wedbush analyst Dan Ives, who has called Nvidia the “godfather of AI,” estimated the chipmaker could eventually hit a $5 trillion to $6 trillion valuation as AI use cases expand into consumer-facing applications, robotics, and autonomous tech.
“The Street is still underestimating [Nvidia’s longer-term] growth by 15% to 20%,” Ives told Yahoo Finance earlier this week. “That could be conservative.”
‘Markets are acting great’
Investor sentiment has flipped sharply since the market’s April lows, with money flowing back into tech after a brief period of defensive positioning amid escalating fears of a US recession on the heels of President Trump’s “Liberation Day” announcement.
In a note to clients on Tuesday, Bank of America said tech inflows last week reached their highest level since June 2024.
“The mistake was people were quick to write off the Mag Seven,” Klein said. “Tech went from a big overweight exiting last year to being an underweight by April and May.”
Now, with markets moving past peak uncertainty and investors gaining more clarity on trade policies, Klein argued that the case for tech is strengthening.
“These are massive companies, extremely well run,” he said. “Their balance sheets and their ability to maintain margin and cash flows is unparalleled.”
Mark Newton, global head of technical strategy at Fundstrat, agreed the current setup favors Wall Street bulls: “Markets are acting great,” he said. “Sentiment remains offsides and that’s a key message. Until we see hedge funds and [CTAs, or algorithm-driven traders] really start to pour money back in, trends look great, the economy is good, and earnings are good.”
Adding conviction to the upside, the rally is no longer confined to just tech alone.
Over the past week, industrials, financials, transports, and consumer discretionary stocks have all staged meaningful rebounds, signaling broad market participation that, in Newton’s view, strengthens the case for further gains.
“Many people get skeptical as indices hit new all-time highs,” he said. “But honestly, that’s the time you really got to pay attention.”
And while concerns about tariffs, interest rates, and geopolitical risks remain, the market’s ability to look through short-term noise is exactly what’s driving the rebound.
“Market tends to price in events like [geopolitical conflict or tariffs] very, very quickly,” Newton said. “If the market’s truly caught off guard like it was in early April, then yes, you might have temporary periods of downside volatility. But it’s important to put on those blinders and not let emotions dictate your investment strategy.”
Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
