Forget about Tech’s outperformance in 2023

By Senad Karaahmetovic 

Despite a strong selloff in 2022, the tech valuations are not as cheap as this year’s pullback may suggest, Bernstein analysts wrote in a client note.

The analysts don’t expect tech stocks to grow at a material premium to the wider market, hence they reiterated a Market Weight rating on the sector.

Here are some key stats explaining the recent performance of the tech sector, as per Bernstein:

• Tech’s 2022 performance (-32% YTD) is its weakest since GFC in 2008 and the poorest relative performance (-1470 bps) since the tech bubble in 2022;
• Tech now represents ~30% of the capitalization of the top 1500 stocks, down from 38% a year ago;
• Tech is now trading at a 29% premium to the market, down from 52% in November 2021. The historical average sits at 25%;
• The percentage of unprofitable tech stocks remains elevated at 32% (vs. historical average levels of 26%);

The analysts recommended investors take a “balanced barbell between expensive/growth and inexpensive/value tech stocks” in 2023. Some of the least expensive stocks include Qualcomm (NASDAQ:), Intel (NASDAQ:), Micron (NASDAQ:), HP (NYSE:), Hewlett Packard Enterprise (NYSE:), eBay (NASDAQ:), and Dell (NYSE:).

On the other hand, Snowflake (NYSE:), Datadog (NASDAQ:), DoorDash (NYSE:), Zscaler (NASDAQ:), and Roblox (NYSE:) are some of the most expensive tech stocks.