The tech sector was a bright spot last week as the banking crisis rocked markets. The Nasdaq Composite was up 4.4% over the week, while the Nasdaq 100 — which includes the index’s largest non-financial companies — was 5.8% higher. Big tech and semiconductor stocks such as Nvidia and Microsoft were up around 12% over the week, while AMD soared over 18%. Some investors started to view tech as something of a safe haven , as bond yields dropped and amid uncertainty over whether the U.S. Federal Reserve will continue with its rate hikes following the banking crisis. So should you buy into the tech rally? Market pros urge caution — but think some stocks are set to outperform. ‘Creeping back’ into the sector Tech investor Paul Meeks, portfolio manager at Independent Solutions Wealth Management, said he’s “creeping back into the sector” after advocating an underweight position in it for a long time. “I do think within technology, there are some pretty interesting, very specific stories,” he said. He likes semiconductor stocks in Europe, including ASML , and is also focusing on artificial intelligence names, such as Nvidia , Microsoft , and Chinese tech firm Baidu . Hedge fund manager Dan Niles, meanwhile, said he likes Meta as it has a “strong” core business, with good user growth and engagement. Its Reels product is also holding up against Tik Tok, he told CNBC Pro Talks last week. However, he cautioned that a lot of tech companies are going to be struggling with cost efficiency going forward. Like Meeks, Niles is also bullish — but selective — on semiconductor stocks. He highlighted that the sector dropped last year on collapsing demand as countries reopened following the pandemic. But in terms of the smartphone and PC corners of the market, “it’s gotten bad enough and it can start to turn with generative AI as a nice kicker on top of that,” Niles added. He said he owns Intel and Nvidia, with the former “starting to close the gap” in manufacturing with Advanced Micro Devices and Taiwan Semiconductor Manufacturing , which should improve its outlook. Nvidia is also the “biggest beneficiary of generative AI” as a lot of graphic chips will be needed, Niles added. Is tech a safe haven? But tech is not out of the woods yet, according to Meeks. “The way that U.S. tech companies distinguished themselves to the upside with their first-quarter reports and … forward guidance is by how many people they could fire — and that is not a recipe for growth,” he told CNBC’s “Street Signs Asia” on Friday. He added that the banking crisis has led to market talk about halting or declining interest rates, and “of course, that is a recipe for greatness for tech stocks.” “It’s all about the interest rates, potentially going down after a full year of them rising swiftly and aggressively. But I don’t think that the fundamentals and technology have changed for the better, or not materially,” Meeks said. Tech firms in particular are vulnerable to rising rates as future profits become less valuable. Financial services firm BTIG said it believes that tech stocks have become something of a “rotation beneficiary given the recent events and rising odds for a hard landing.” “If you are managing money, and you are selling high-beta cyclicals but have a mandate to be fully invested, that money is going to find its way into more perceived safe havens. While we don’t think FANG+ names are immune to weakness, they are perceived as safer in an economic downturn than Energy, Industrials, Financials, etc,” the bank’s analysts wrote in a March 16 note. However, they warned that once these “rotations” have run their course, there could be renewed weakness in tech. — CNBC’s Michael Bloom, Sarah Min contributed to this report.
Time to buy the tech rally? Hedge fund manager Dan Niles and others reveal their top picks
