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.”
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.”
