Barclays analysts believe the rally in big tech stocks is here to stay over the near to medium term. The firm said in a note Thursday that big tech is driving a high degree of concentration in US equities.
"Whether by market cap or contribution to returns, the ascendancy of Big Tech (AAPL, AMZN, GOOGL, META (NASDAQ:META), MSFT and NVDA) has boosted concentration within US large-cap equities well above the 90th percentile of long-term observations," they wrote.
The bank acknowledges that for some investors, a fast bull run driving an increasingly tech-centric and top-heavy US stock market may be uncomfortably reminiscent of the Dotcom bubble.
And while analysts note the Dotcom bubble is one of the few comparable instances of the S&P 500 becoming so concentrated in terms of both returns and index weighting, Barclays thinks "US equities are much better supported in terms of fundamentals today, especially with regard to its largest Tech constituents."
"Big Tech valuations reflect high-quality earnings growth, plus the scarcity of that growth elsewhere in the equity market," added the bank, which believes the "fundamentals remain supportive of Big Tech over the near to medium term."