The same technology giants that helped drag the S&P 500 to the brink of a bear market in April are giving the recovery in US equities some legs.
“I feel really good about tech coming out of this earnings season,” said Brett Ewing, chief market strategist at First Franklin Financial Services. “There’s still more gas in this tank.”
The S&P 500 Index is within 4% of its February record high with much of the rebound being fueled by easing tensions between the US and its trade partners, as well as Big Tech results that showed demand for things like cloud-computing services, software, electronic devices and digital advertising remain intact even as the threat of higher tariffs on sales lingers.
“Buying the tech dip will be a theme throughout the year,” said Ewing. “There’s still a lot of money on the sidelines and it has to be put to work.”
Another hurdle will be Big Tech’s hefty valuations. Bloomberg’s Magnificent Seven gauge is priced at 30 times projected profits, according to data compiled by Bloomberg. Meanwhile, the S&P 500 is trading at 21 times earnings projected over the next 12 months, up from a low of 18 times in April and well above the average of 18.6 times over the past decade.
Barry Knapp, managing partner at Ironsides Macroeconomics, said he’s wary of Big Tech’s rich valuations even though the group looks attractive from a fundamental perspective. He’s “modestly underweight” the sector and has relatively more exposure to industrials, materials, energy and financials in anticipation of a capital spending recovery in the second half of the year.
“Being overweight on tech here borders on recklessness, because you would have such a huge proportion of your portfolio in this one sector, and that leaves you vulnerable,” Knapp said.
Truist Advisory Services’ Keith Lerner, however, sees Big Tech leading the broader market higher in the last half of 2025 with spending on artificial intelligence computing continuing to climb.
“Our view is that earnings could still be maybe flatter but likely have less downside than what we would have thought heading into the earnings season,” said Lerner, who is Truist’s co-chief investment officer and chief market strategist.
The Magnificent Seven profit estimates in 2025 have stayed steady over the past two months. The group is projected to deliver profit growth of 15%, roughly in-line with analysts’ expectations before the reporting season began in mid-April and twice the expansion projected for the S&P 500, according to data compiled by Bloomberg Intelligence.
“Investors are going to be drawn back toward these names with secular growth,” said Lerner. Tech “could be that catalyst later on to actually see the market re-accelerate later in the year.”
