Technology is the clear winner in the stock market in May

The technology sector became the clear winner in the stock market in May and not just in the US, where Nvidia was the protagonist due to its very strong rally as a result of its recent results and its good position to absorb the wave of demand that generates generative AI (a branch of artificial intelligence is on the rise). In Europe, nothing was more profitable than investing in the technology sector last month, which rose 7% on average, becoming the most optimistic, and 6 points behind the second best performer, Travel & Leisure.

the stimuli Several factors have fueled its recovery in recent weeks, after the setback it suffered in 2022. So far, the main factor has been the possibility that central banks will hit the pause button when raising interest rates. In this case, “the headwinds for growth stocks, such as technology stocks, will decline,” explains Simon Weber, a principal at Schroders. But in the past few days, there has been an adjustment in expectations after the recent inflation data in the US, and now the market is giving opportunities to the Fed to make another increase.

This potential downtime was not the only reason the sector was moving forward. “Artificial intelligence (AI) and cost-cutting optimism hope profits will grow again as investors look for duration as inflation and bond yields ease and pressure eases on technical valuations,” explains Ben Laidler, global markets strategist at multi-asset trading platform eToro. . The expectation around artificial intelligence is maximum. “We see a quantum leap in the following applications of AI, similar to the introduction of the Internet,” says Frank Schwartz, Principal at MainFirst.

Semiconductors benefited

Within the European sector, the largest gains were made in the stock market during the month of May two semiconductor companies, kind of company On paper it is bound to benefit from the demand for AI power. These are Dutch Semiconductor Industries, better known as Besi, and ASM International. Either way, their value has risen more than 25% in the past month. Followed by ASML Holding, Aixtron and Nextcompany.

In a volume similar to that 25% is what the European sector of the stock market has grown this year. Only companies operating in the tourism and entertainment sector rose, adding about another 1.5 points.

in Wall StreetIndexes such as the Nasdaq 100 also gained nearly 8% in May, led by Marvell Technology, Zscaler or Advanced Micro Devices. After a good performance last month, the Nasdaq 100 has already gained more than 30% so far this year.

Technology is also the protagonist in other indicators. If you look at who’s pulling the bandwagon in the S&P500 in May, Advanced Micro Devices is joined by Nvidia (up more than 160% on the year) or Broadcom. In the year, Nvida and Meta are the top rebounding companies in the S&P500.

But it always happens, every technology disruption is accompanied by a word bubble. And in the case of artificial intelligence, it will not be less. From Bank of America, they calculated that real rates would have to rise another 100-150 basis points to burst the little bubble in AI. They describe that “4% real yield blew up the dotcom bubble, 3% subprime mortgages” and cryptocurrency yields exploded when real yield rose from -100 basis points to 150 points. “