Deutsche Bank upgrades US tech, says selloff has gone too far

FILE PHOTO: The logo of Deutsche Bank is seen on the roof of a building outside a Deutsche Bank branch office in Malaga, Spain, April 24, 2024. REUTERS/Jon Nazca/File Photo

Nov 2 : Deutsche Bank turned bullish on US technology stocks, reversing a downgrade made three weeks ago, saying a sharp selloff has created an attractive buying opportunity and much of the AI-related risk was already priced in.

More than $2 trillion was wiped off the Nasdaq 100's market value last month, as investors reassessed AI-related investments and growth expectations.

Here are more details from the brokerage's Friday note:

• Tech and mega-cap growth stocks have lagged the rest of the S&P 500 by more than 16 per centage points over the past three weeks, falling about 11 per cent while the broader index rose nearly 6 per cent, leaving the sector near the low end of its historical trading range

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• "Magnificent Seven" results reinforced investor concerns about the pace of returns from heavy AI spending, contributing to recent weakness in large-cap technology stocks

• Technology's relative performance has fallen to the bottom of its long-term range, a level that has marked attractive entry points in recent years

• Previous rotations back into tech have resulted in average gains of about 32 per cent and roughly 30 per centage points of outperformance versus the rest of the S&P 500

• Overall equity positioning remains relatively light despite solid earnings growth, leaving room for investors to increase exposure if corporate profits remain resilient

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