Credit: Mariia Berezovsky on Unsplash
Deutsche Bank has turned positive on US technology stocks again, upgrading the sector to overweight, Reuters reported on Monday.
An overweight rating means the bank advises clients to hold more of the sector than usual, and it reverses a downgrade made about three weeks earlier.
That earlier move, on October 9, cut tech to neutral, according to MacroBusiness. The bank described it as a short-term call at the time, warning that risks outweighed the likely rewards.
In a note to clients on Friday, the bank’s strategists said the recent selloff had created a good chance to buy. In their view, much of the risk linked to AI is already reflected in share prices.
Investing.com, which also reported the note, named the strategists as Binky Chadha, the bank’s chief strategist, and Parag Thatte.
The selloff wiped more than $2tn off the value of the Nasdaq 100 in October, as doubts over AI spending grew. Results from the biggest US tech firms, known as the Magnificent Seven, added to those worries. Alphabet’s shares, for example, fell more than 12% after its latest results.
According to the bank, large tech and growth stocks fell about 11% over three weeks, while the rest of the S&P 500 rose almost 6%. That left tech near the bottom of its long-term range against the wider market.
The strategists said that level has often been a good time to buy in recent years. After past swings back into tech, the sector gained about 32% on average and beat the rest of the S&P 500 by about 30 percentage points.
The bank also said investors hold relatively few shares overall, despite solid earnings growth. As a result, they have room to buy more if company profits hold up.
However, Investing.com reported that the bank flagged risks, including new tech rules after the US midterm elections and a wider geopolitical crisis. It also said shares could fall further if a major shock hits markets.
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