One of the most remarkable things we have seen on global markets in 2023 so far has been the performance of the giant US tech stocks. We all know names like Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Amazon.com Inc (NASDAQ: AMZN) and Tesla Inc (NASDAQ: TSLA).
But if you don't own any of these US tech stocks in your own share portfolios, you might have missed what has happened this year.
Put simply, all of those shares have jumped on a rocket ship. Take Amazon stock. It's up 50% since the start of the year.
Apple shares have jumped by a similar amount, and recently became the first company to cross a mind-boggling market capitalisation of US$3 trillion.
Alphabet's Class A shares are up a tamer 31% or so, while Facebook owner Meta Platforms Inc (NASDAQ: META) is up a not-so-tame 139%.
Netflix Inc (NASDAQ: NFLX) stock has gained just over 49%, while Tesla is in Meta's league with its 150% rise.
But all of these stocks have still been blown out of the water by semiconductor titan NVIDIA Corporation (NASDAQ: NVDA). Its shares have gained a whopping 196%, rising from around US$143 per share to the US$424 the company closed at last night:
So with these kinds of fans, there's little doubt that some investors who own them might be getting itchy fingers. With these US tech stocks turbocharging the value of a brokerage account, it can be tempting to take some money off the table.
But is this a good idea?
Well, not according to Chris Demasi, portfolio manager at Montaka Global Investments.
In a recent report, Demasi argues that selling these winners "could be a costly mistake in the long run".
Expert: Don't sell your soaring US tech stocks just yet
The report acknowledges that these US tech stocks have been on a massive run this year, noting:
Together Amazon, Microsoft, and Alphabet contributed nearly 30% of the gains made by the S&P500 in the first half of the year… Adding Nvidia, Meta Platforms, Apple, and Tesla, this exclusive group of just seven AI and technology winners accounted for almost 80% of total index gains, despite representing just a quarter of the value of the index.
Such phenomenal performance so quickly from the largest companies has led some investors to wonder if these stocks have run too far and whether they should take profits by selling.
However, Demasi argues that selling out now would shortchange investors from even higher gains in the future. He writes that despite their gains this year, "their stock prices still haven't caught up to huge improvements in their businesses, which suggests the rally has further to run".
To illustrate, he looks at Amazon stock. Demasi points out that this e-commerce giant's AWS cloud business has "recently made several new high-powered AI capabilities available to customers, including its own specialized chips for training and inferencing machine learning models, a new managed service to access first and third-party AI models, and an AI-assisted coding program".
Demasi also analyses the progress Amazon has made outside the cloud arena:
The e-commerce behemoth redesigned its US fulfilment network to operate a regional model with lower costs and faster shipping times for consumers, as well as building the third-largest digital advertising business in the world by selling ad space on its website and media properties that grab the attention of hundreds of millions of shoppers.
Despite these strides, Demasi noted that Amazon shares are still down more than 20% from the start of 2022.
Another example is Microsoft. Demasi argues that Microsoft's Azure has "cemented its place as an AI pioneer by deepening its partnership with OpenAI to provide customers access to the machine learning models behind ChatGPT and DALL-E, powered by Azure's cloud platform".
He also pointed out that OpenA customers have risen 10-fold in the past quarter alone. Yet the Microsoft share price itself is still flat against where it was at the start of last year.
