Tech stocks in the US stock market may pause, while small-cap stocks and value stocks present investment opportunities

According to Zhitong Finance APP, the strong rise of large US technology stocks may take a brief pause, bringing hope to other markets that have been lukewarm so far this year. Small-cap stocks and value stocks (such as financial and industrial stocks) that have lagged behind may appear to be very cheap. Data shows that although the S&P 500 Index has risen by 14.6% so far this year, most of the overall index gains are concentrated in the information technology and communication sectors, which have risen by 28.2% and 24.3% respectively. Meanwhile, the performance of other sectors has been relatively lackluster, with the utility sector, which lags behind the above two sectors, only rising by 9.5% so far this year. Many investors believe that given the strong returns of large technology stocks and the excitement about the revolutionary potential of artificial intelligence, the long-term prospects of large technology stocks are solid. However, the significant rise in the stock prices of these large technology stocks, including NVIDIA (NVDA.US), so far this year has raised concerns about the possibility of an overheated trend. Michael Purves, CEO of Tallbacken Capital Advisors, said, "NVIDIA is like a rocket ship. When things develop so rapidly, you definitely don't want to be the last one to exit." "People are looking to invest in this stock market rebound. If they sell NVIDIA stocks, they are most likely to buy value and cyclical stocks." The market rotation from large technology stocks to other sectors may alleviate concerns about the concentration of the stock market that have emerged in recent weeks, as market gains narrow down to a few companies again. Data shows that about 60% of the total return of over 14% of the S&P 500 Index so far this year is driven by five companies: NVIDIA, Microsoft (MSFT.US), Meta (META.US), Alphabet (GOOGL.US), and Amazon (AMZN.US). It is worth noting that there have been signs of a "cooling off" in the rise of some large technology stocks in the past week. NVIDIA's stock price dropped by 10% from the peak reached last Thursday, causing this artificial intelligence chip giant to lose its brief position as the world's most valuable company. NVIDIA fell by over 4% last week, while the S&P 500 Index rose by less than 1%. Michael Purves pointed out that from several indicators, technology stocks seem to have risen excessively. He stated that the relative strength indicator of the Mag 6 index, which measures the speed and magnitude of price changes of the six major US stocks, is at historically high levels. In addition, since early June, the price ratio between the Nasdaq 100 Index and equal-weighted indices such as the S&P 500 has risen by 9%. The optimism of retail and institutional investors is high, which some see as a contrarian indicator, as it means that the threshold for positive surprises has been raised. As of the week ending June 19th, the US individual investor confidence index remained stable at 44%, about 8 percentage points higher than the historical average. The latest survey by Bank of America Global Research shows that fund managers' confidence is at its highest level since the end of 2021, as they are reducing cash positions and increasing stock allocations In response, Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily Trend Report, stated that the VanEck Semiconductor ETF has risen by 13% in the past month, indicating that the artificial intelligence frenzy may have gone too far. He said, "In the short term, you may see a pullback in tech stocks and semiconductor stocks, as well as a healthy rotation in other parts of the market. This will keep the bull market going." However, even in the event of a pullback, there is little sign that investors will stay away from tech stocks and growth stocks for a long time. Shorting tech stocks has been a losing proposition for the past decade, with the Nasdaq rising by over 400% during this time. In comparison, the Russell 1000 Index has only risen by about 70% over the same period. Additionally, with investors rushing to buy on dips, tech stocks may rebound quickly. Jason Alonzo, Portfolio Manager at Harbor Capital Advisors, said, "I don't think investors are looking to cash in just yet. If there's any difference, it's that I see some people feeling like they missed out on the trend and are trying to catch up."