Tech Stocks: The New Safe Haven for Investors

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Tech Stocks: The New Safe Haven for Investors

Tech stocks make a comeback as investors seek a new safe haven amidst banking turmoil. With potential for further upside, Wedbush Securities identifies Apple and Tesla as top picks for 2023.

The Remarkable Comeback of Tech Stocks in 2023

The tech stock comeback has mainly been due to the prospect that the Federal Reserve may be close to ending its interest-rate hikes. With an 87% gain, chipmaker Nvidia is the best performer of 2023 in the S&P 500 index, followed by Meta Platforms with 72% and EV-maker Tesla with 59%. The tech-heavy Nasdaq 100 index has also seen a significant jump of more than 18% so far this year, after a 33% plunge in 2022.

Read More: Dire Warnings of U.S. Economic Crisis After Latest Rate Increase

The Upside of Tech Stocks According to Wedbush Securities

According to Dan Ives, managing director and senior equity research analyst at Wedbush Securities, tech stocks still have a “nice upside,” and the firm reiterates its start-of-the-year forecast for an advance of more than 20% for the asset type in 2023. Ives believes that tech shares may even gain the status of a safe haven for investors spooked by the recent volatility in other assets due to the banking turmoil that erupted earlier this month.

“While it sounds like a Twilight Zone comment to many investors, tech stocks have become the new safety trade with Big Tech names a major beneficiary of this dynamic,” Ives said in a note.

Why Tech Stocks are the New Powerhouse Safe Haven

The financial sector’s recent instability, triggered by bank failures including Silicon Valley Bank and Signature Bank, has caused investors to speculate that the Federal Reserve may pause its interest rate hikes. Such a move would have a positive effect on tech stocks as increasing borrowing costs can negatively impact their earnings potential and valuations. Investors are seeking low-risk investments, and tech stocks have emerged as a relatively safe choice in the face of market volatility. A decrease in borrowing costs would further increase the appeal of tech stocks, driving continued growth in this sector.

Tech Firms Increase Stock-Market Appeal

Technology companies have been taking steps to boost their profitability by trimming their costs, which has had a positive impact on their appeal to investors. These efforts have helped to “de-risk” the outlook for 2023, according to Dan Ives, senior equity research analyst at Wedbush Securities. In addition, many tech stocks have been overlooked by investors, leaving them undervalued and ripe for potential gains. Ives emphasized this point in his comments, stating that tech stocks are still “under-owned” and represent a compelling investment opportunity in his view.

Read More: Navigating the Modern Stock Market: Opportunities and Challenges

Wedbush’s Top Tech Picks for 2023

Wedbush Securities, a leading investment firm, has identified Apple as its top tech pick for the year, while naming Tesla as its favorite “disruptive” tech name. Apple’s diverse product portfolio and expanding ecosystem of services make it well-positioned for strong performance in the coming months, according to the investment firm. Meanwhile, Tesla’s groundbreaking innovations in the electric vehicle space and growing suite of energy solutions make it a major player in the transition to a more sustainable future. These two companies are highly regarded in the tech sector and are expected to continue generating strong returns for investors.

The History of Tech Stocks & Market Volatility

Tech stocks have been performing well lately and are seen by some as a safe haven in times of market volatility. However, it’s worth noting that this hasn’t always been the case. During the dot-com bubble of the late 1990s, tech stocks were wildly overvalued and eventually crashed, leading to a prolonged bear market. It’s important for investors to consider the long-term prospects of individual companies and the broader economy. Just because a company is in the tech sector doesn’t necessarily mean it’s a good investment.

Read More: Stock Market Need to Knows, March 2023

Banking Turmoil Leads Investors To Tech

The recent banking turmoil has led investors to seek a new safe haven, and tech stocks have emerged as a promising choice. With a strong comeback this year and potential for further upside, tech stocks may continue to outperform in 2023. As always, investors should conduct their own research and due diligence before making any investment decisions. 

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Stephen Fruchs

Stephen Fruchs is a finance contributor on the Trade Oracle platform. His experience is extensive in everything from micro to macroeconomic trends. With a decade of experience in the finance space, Stephen Fruchs provides consistent economic insights into the changing stock market landscape.