Apple CEO Tim Cook stands next to the new Apple Vision Pro headphones during Apple’s Worldwide Developers Conference on June 5, 2023 in Cupertino, California.
Justin Sullivan | Getty Images
Last time technology stocks performed better in the first half of the year, apple is promoting its Lisa desktop computer, international business machines corp. is America’s most valuable tech company, and Mark Zuckerberg wasn’t born yet.
On Friday, the Nasdaq ended the first six months of the year with a gain of 1.5%, bringing its gain so far in 2023 to 32%. It was the biggest first-half gain for a tech index since 1983, when the Nasdaq rose 37%.
That’s an astounding achievement considering what’s happened to the tech industry over the past four decades. Microsoft Launched in 1986, it sparked a boom in PC software. Then came the Internet browser in the 1990s, leading to the dot-com era and soaring e-commerce, search, and computer network stock prices.The past decade has seen the emergence of multi-trillion dollar megacorporations that are now the most valuable in the United States
While previous eras have had sustained rallies, none have opened the year to match 2023.
Even more alarming is the fact that when this happens this year, the U.S. economy is still at risk of falling into recession and facing a banking crisis, notably the March collapse of Silicon Valley Bank, the financial backstop of much of the venture capital and start-up world. core. The Federal Reserve has also steadily raised its benchmark interest rate to the highest level since 2007.
But when it comes to tech, momentum is always the driver, and investors are known to fear missing out, even if they’re also worried about frothy valuations.
After a miserable 2022, with the Nasdaq down by a third, cost cutting and efficiencies are all that matters.mass layoffs letteryuan and amazon And paving the way for rebounding earnings and more realistic growth prospects for many smaller companies.
yuan and teslaBoth companies were battered last year but have more than doubled their market capitalization so far in 2023. Alphabet is now up 36% after falling 39% in 2022.
None of these companies were present the last time the Nasdaq got off to a good start to the year. Meta CEO Mark Zuckerberg, born in 1984, founded the company formerly known as Facebook in 2004. Tesla was founded in 2003, five years after Alphabet’s predecessor, Google.
As 2023 looms, attention turns to artificial intelligence and a lot of activity around generative AI chatbots that respond to text-based queries with intelligent and conversational responses.Microsoft-backed OpenAI has become a household name (and topped CNBC’s Disruptor 50 list) with its ChatGPT project, and the money is pouring in Nvidiawhose chips are used by many companies taking advantage of the latest advances to drive artificial intelligence workloads.
Nvidia’s stock soared 190% in the first half, pushing the 30-year-old company’s market value above $1 trillion.
“I think tech will continue to dominate because we’re still passionate about artificial intelligence,” Bryn Talkington, managing partner at Requisite Capital Management, told CNBC’s “Closing Bell” on Thursday.
Tolkington, whose firm owns a stake in Nvidia, said the chipmaker has a unique story whose growth has not been shared across the industry. Instead, large companies working on AI must invest heavily in Nvidia’s technology.
“Nvidia doesn’t just have the shovel and ax of the AI gold rush,” Tarkington said. “They’re literally the only hardware store in town.”
Remember the $10,000 Lisa?
Apple’s gains haven’t been quite as dramatic, but the stock is still up 50% this year, trading at record highs and pushing the iPhone maker’s market capitalization to $3 trillion.
Apple still relies on the iPhone for most of its revenue, but with the release of this month’s The Vision Pro headset helped revive investor enthusiasm. It’s Apple’s first major product release since 2014, and it’ll be priced at $3,499 starting early next year.
That sounds like a lot, unless compared to the price tag of Apple’s first-generation Lisa computer, introduced 40 years ago. Named after the daughter of co-founder Steve Jobs, the PC started at $10,000, far from mainstream consumers.
Apple’s revenue in 1983 was about $1 billion, which is equivalent to the average daily revenue of the company in the first quarter of 2023 (Apple’s second fiscal quarter).
Tech stocks outperformed the stock market in the first half, with the S&P 500 gaining 16% as a whole, while the Dow Jones Industrial Average rose just 2.9%.
Investors looking for red flags in the second half of the year don’t have to look too far.
Global economic concerns remain, underscored by uncertainty over wars in Russia and Ukraine and ongoing trade tensions with China. Short-term interest rates are currently above 5%, meaning investors can earn mid-single-digit risk-free returns from certificates of deposit and high-yield savings accounts.
Another skeptical sign is the lack of a market for tech IPOs, with emerging companies continuing to wait and see despite enthusiasm brewing across the industry. There hasn’t been a high-profile venture-backed tech IPO in the U.S. since late 2021, and investors and bankers told CNBC the second half of the year is expected to be quiet as companies wait for better predictability in their data .
There are many challenges for investors to consider, Jim Tierney, chief investment officer for U.S. focused growth at Bernstein, said Friday on CNBC’s “Power Lunch.” Like Tarkington, he’s not sure how much of an impetus AI is currently having on the broader corporate world.
“When it comes to artificial intelligence specifically, I think we have to see all companies benefit,” Tierney said. “That will come, I’m just not sure what’s going to happen in the second half of the year.”
Meanwhile, economic data was mixed. A CNBC and Morning Consult survey earlier this month found that 92% of Americans are cutting spending as inflationary pressures persist.
“The fundamentals have gotten tougher,” Tierney said. “If you look at consumer spending today, consumers are scaling back. All of that suggests that the fundamentals here are tighter.”
watch: CNBC’s full interview with Ron Insana and Jim Tierney
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