The so-called Magnificent Seven of Wall Street has lived up to its majestic name but in this case, it is not a collective merit that is meant, but rather an outstanding result of Microsoft Corporation, which has become a factor of significant influence on the overall indicator.
On Wednesday, November 8, the mentioned software industry giant stepped up the growth of the largest technology and Internet stocks. The rally in the sphere of big tech contributed to the fact that the market value of the Nasdaq 100 increased by about $1.5 trillion. According to experts, the dynamic of this indicator may be a signal that the period of skeptical perception of pricey market leaders, which this year has become something like a trend, is gradually coming to an end.
Jonathan Cofsky, portfolio manager at Janus Henderson Investors, says that Microsoft has a sustainable business strategy, which is implemented very well in practice. It is possible to supplement his assessment with the fact that this concept demonstrates a high level of efficiency. Also, according to him, this technology giant is a clear winner in the artificial intelligence industry. Separately, the expert noted that the company has fewer sustainable risks than other players in the innovation sector.
Microsoft has been growing for nine consecutive sessions. This is the longest streak in the last four years. Since the end of September, the share price of the technology giant has shown an increase of 15%. This fact makes the company the leader among the seven so-called megacapsules, which provided a positive market dynamic this year.
Microsoft currently has a market capitalization of $2.7 trillion. This indicator is close to Apple’s current result. The market capitalization of Tim Cook’s company is $2.84 trillion.
Microsoft can now feel confident in economic terms since its advanced products are in demand. In autumn, consumer interest in cloud computing was restored. The company has its offers in this area, which is why the general trend is a favorable external factor for it. The technology giant also offers its line of products based on artificial intelligence on the market. The demand for AI is showing steady growth.
Wall Street has always been very reserved about the opportunities and prospects of big tech. There were some concerns about the group’s valuation and the potential for growth in this earnings season. In part, this attitude was justified. Alphabet’s results in the sphere of cloud computing turned out to be very moderate and did not become an example of impressive growth. Also, Apple’s sales volumes outside China were recognized by experts as weak.
But at present, the mood towards big tech is changing. In part, this trend is due to optimistic expectations about monetary policy in the United States, which are based on the fact that the latest employment report assumes the probability of the Federal Reserve stopping raising rates.
Mark Martiak, managing director of investments at Alliance Global Partners, says that, in his opinion, there may be a peak in treasury bond yields at the moment, which will improve sentiment, especially concerning the technology sector. He said that the results, similar to those demonstrated by Microsoft, are a signal that the worst in terms of fundamentals is over. According to him, the technology sector can not only restore its leading role but also maintain it until the end of the year.
UBS Global Wealth Management claims that the results of the current earnings season are evidence that concerns related to the prospects for the dynamic of fundamental technological indicators cannot be described as justified. Solita Marcelli, Director of Investments in the Americas of this organization, says that the quarterly results strengthen the positive assessment of the prospects for artificial intelligence and the software industry.
Jack Ablin, investment director at Cresset Capital, believes that the optimistic mood may be excessive. According to the expert, investors’ enthusiasm is justified, but megacapsules remain fully valued, and expectations of future revenue growth may be in doubt. Jack Ablin says that historical experience shows that it is difficult for technology companies to outperform the market with differences in valuation.
As we have reported earlier, Microsoft CEO Lures Developers to Azure Cloud.