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Apple CEO Tim Cook stands next to the new Apple Vision Pro headset on display during the Apple Worldwide Developers Conference on June 5, 2023 in Cupertino, California.
Justin Sullivan | Getty Images
The last time tech stocks did better in the first half, apple He was promoting Lisa’s desktop computer, ibm It was the most valuable tech company in the US and Mark Zuckerberg wasn’t even born.
On Friday, the Nasdaq ended the first six months of the year up 1.5%, bringing its gains so far for 2023 to 32%. This is the biggest first-half jump in the tech-heavy index since 1983, when the Nasdaq rose 37%.
It’s an amazing feat, given what’s happened in the tech industry over the past four decades. Microsoft It went public in 1986, sparking a computer software boom. Then came Internet browsers in the 1990s, which led to the Internet bubble years and high prices for e-commerce, search, and computer networking. The past decade has seen the rise of mega-cap, trillion-dollar companies that are now the most valuable companies in the United States.
While those previous eras included continuous rallies, none of them had a start to the year to rival 2023.
More surprisingly, this year it is happening while the US economy is still at risk of slipping into recession and dealing with a banking crisis, highlighted by the March collapse of the Silicon Valley Bank, the financial core of many of the world’s ventures and start-ups. The Federal Reserve has also steadily raised its benchmark interest rate to its highest level since 2007.
But momentum always drives when it comes to technology, and investors are notoriously afraid of missing out on anything, even if they’re simultaneously worried about frothy valuations.
With a miserable 2022 ahead, in which the Nasdaq has lost a third of its value, the big story has been cost-cutting and efficiency. Mass layoffs in the alphabetand Meta and Amazon And so in many of the smaller companies that paved the way for a revival in earnings and more realistic expectations for growth.
meta f TeslaBoth of which took a huge hit last year have more than doubled in value so far in 2023. Alphabet’s value rose 36% after declining 39% in 2022.
None of these companies had the last time the Nasdaq had a better start to the year. CEO Meta Zuckerberg, who created the company formerly known as Facebook in 2004, was born in 1984. Tesla was founded in 2003, five years after Alphabet’s predecessor, Google.
As 2023 rolls around, attention has turned to AI and a torrent of activity around AI-powered generative chatbots, which respond to text queries with intelligent, conversational responses. Microsoft-backed OpenAI has become a household name (and was #1 on CNBC’s Disruptor 50 list) with its ChatGPT software, and the dollars are pouring in. nvidiawhose chips are used to power AI workloads in many companies taking advantage of the latest developments.
Nvidia shares rose 190% in the first half, pushing the 30-year-old company’s market capitalization above $1 trillion.
“I think you will continue to see the dominance of technology because we continue to feel ambiguous about AI,” Brian Talkington, managing partner at Requisite Capital Management, said in an interview on CNBC’s Closing Bell program Thursday.
Talkington, whose company owns Nvidia shares, said the chipmaker has a unique story, and its growth is not shared across the industry. Instead, the big companies working on AI have to spend big on Nvidia technology.
“Nvidia doesn’t just have the shovel and axes of this AI-powered Goldrush game,” said Talkington. “They are actually the only hardware store in town.”
Remember Lisa’s $10,000?
Apple hasn’t seen very big gains, but the stock is still up 50% this year, trading at a record high and propelling the iPhone maker to a $3 trillion market cap.
Apple still relies on the iPhone for the bulk of its revenue, but its latest leap into virtual reality with this month’s announcement of The Vision Pro helped spark investor enthusiasm. It was Apple’s first major product release since 2014, and it will be available starting at $3,499 starting early next year.
That seems like a lot, except when you compare it to the price of the initial Lisa computer, which Apple put out 40 years ago. Named after the daughter of co-founder Steve Jobs, this computer started at $10,000, putting it out of the hands of average consumers.
Apple’s revenue in 1983 was nearly $1 billion, or about the amount of money the company brings in on an average day in the first quarter of 2023 (Apple’s second fiscal quarter).
Technology was the obvious story for stock markets in the first half, with the broader S&P 500 gaining 16% and the Dow Jones Industrial Average rising just 2.9%.
Investors looking for red flags heading into the second half don’t have to look far.
Global economic concerns remain, evident in the uncertainty surrounding the wars in Russia and Ukraine and the ongoing trade tensions with China. Short-term interest rates are now above 5%, which means investors can get risk-free returns in the mid-single digits from Certificates of Deposit and high-yield savings accounts.
Another sign of skepticism is the absence of a technology IPO market, where startups continue to sit on the sidelines despite the growing enthusiasm across the industry. There hasn’t been a high-profile venture capital-backed tech IPO in the US since late 2021, and investors and bankers told CNBC that the second half of the year is about to remain quiet, as companies wait for better predictability of their numbers.
There are a lot of challenges for investors to consider, Jim Tierney, US growth-focused chief investment officer at AllianceBernstein, told CNBC’s “Power Lunch” on Friday. Like Talkington, he’s not sure how much of a boost the broader corporate world sees from AI right now.
“In terms of AI specifically, I think we have to see a benefit for all companies,” Tierney said. “It will come, I’m not sure that will happen in the second half of this year.”
Meanwhile, economic data was mixed. A poll earlier this month from CNBC and Morning Consult showed that 92% of Americans are cutting back on spending as inflationary pressures persist.
“The basics get tougher,” Tierney said. “You look at consumer spending today, the consumer is declining. All of this suggests that the fundamentals are more stretched here than not.”
He watches: The full CNBC interview with Ron Insana and Jim Tierney
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