Tech's big shift: From defensive play to risk-on

Yahoo

02-06-2025

Big Tech stocks like Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOG, GOOGL) have powered the markets for months. It made them more of a defensive play for many investors. But that view of tech may be starting to change. In the video above, Envestnet Solutions co-chief investment officer & group president Dana D'Auria explains what's driving the shift.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
So how much can we count the tech sector in?
If tech was one of the primary drivers of the lags that got us to where we're at today, can tech be the savior of the market still in the second half of this year?
You know, it's interesting.
So I think tech position has sort of shifted from this kind of almost defensive play, because they're they throw off a lot of cash, right?
These businesses are solid businesses creating their own cash, um, so less susceptible to interest rate concerns.
Obviously the fact that we're gonna be higher for longer, you know, yeah, they're growthy and, you know, typically that would hurt a growthier play, uh, but it hasn't really impacted the tech sector as much.
What we have seen more though is tech kind of transitioning from This defensive play kind of posture to more of the risk on trade, right?
And so, and, and a lot of that is, you know, we have AI is a big part of the narrative obviously as to how well tech does.
And so I think what we're, what we continue to see and, and to your question on, you know, kind of does it save the market.
I think to a certain extent, the answer to that is just correlated with where do we, where do we see the risk trade in general, right?
Do we, do we think that things are sort of calm down?
Um, we know we have, uh, unemployment is, is staying, you know, Enough that the Fed is kind of empowered not to reduce rates.
Um, inflation's kind of staying tame right now too, in spite of now we are, you know, now a month into some of these tariffs taking effect.
So, you know, the, the, the economic picture looks pretty good, uh, and we're seeing earnings announcements like the Nvidia announcement that are positive.
So I think to the extent that we don't have sort of a major own goal, as it's related to some of the tariff, you know, possibilities, um, you know, obviously there's concern.
in the market around uh the tax bill and the implications for the deficit, but the economy looks to be still on fairly decent footing from a hard data perspective, and the tech sector sort of leads the way on that.
So I'd say, um, you know, you, you have, look, if you're an average investor, you have a ton of the tech sector in your portfolio.
I wouldn't overweight it, uh, you know, I wouldn't add to it because you have a ton of it already.
Uh, but I do think there's, it has the solid capability to, um, you know, keep driving us forward.