Unsung Tech Heroes Carry S&P 500 as Trump Trade Hits Wall

  • U.S. stocks reliant on tech this year as ‘Trump trade’ unwinds
  • Semiconductors to game-makers rallying amid wide breadth

Why Tech Stocks Are the Story of the Market This Month

Forget FANG. It’s the unsung heroes of the tech rally that make up the U.S. equity market’s backbone in 2017.

Thirty-percent gains in Facebook Inc. and Apple Inc. certainly haven’t hurt. But with 84 percent of technology stocks in the green this year, stock market breadth among computer and software makers is greater than any other S&P 500 industry. For every household name such as Google rallying, a company like Lam Research or Activision Blizzard is doing twice as well.

It’s one reason stocks are proving hard to kill. With banks fallen from their post-election grace, energy shares in the doghouse and disarray in Washington crippling reflation trades, computer and software makers are one of the only groups with a bull case unblemished.

They’ve rallied 13 of the last 16 days and are up three times as much as the S&P 500 this year, the biggest lead since 2009 for a period that long.

Tech shares are one of the few remaining corners of the market to which investors are adding money. Amid an $8.9 billion outpouring from U.S. equity funds in the week ending May 17, tech stocks posted their eleventh straight week of inflows, racking up $1 billion, according to Bank of America.

In a ranking of year-to-date rallies, video-game stocks are woven among the winners list. Activision and Electronic Arts Inc. have added 53 percent and 36 percent, respectively. Among chipmakers, Lam Research Corp., Broadcom Ltd and Skyworks Solutions Inc., are all up at least 34 percent.

In the past month alone, tech has advanced 4.9 percent, almost three times the next-best industry group, with Nvidia Corp., Applied Materials Inc. and Xilinx Inc. among the biggest gainers.

After Apple, Nvidia’s 26 percent rally so far this month is responsible for the greatest index-point contribution to the S&P 500 tech index. The graphics-chip maker racked up about $17 billion in new market value after reporting an eighth straight quarter of earnings that beat expectations and showed expansion into new markets.

While Wednesday’s selloff practically erased the gains made by tech in the last month, semiconductor stocks remain one group still soundly in the green. Shares of Qorvo Inc. have also helped buoy the index as the company beat earnings expectations and hedge fund Baupost Group reported a 5.7 percent stake in the company.

Another big winner outside the big five names is Electronic Arts. The stock is the fifth-best performer in the tech index this year, as the maker of some of the most popular sports gaming franchises like FIFA and Madden NFL grows revenue streams through online downloads and mobile content.

There are some comeback stories mixed in, too. Yahoo! Inc. is on pace for its best year since 2013 as it gears up to close a $4.9 billion deal to sell its web assets to Verizon Inc. The company’s operating margin has shown signs of improvement as well as CEO Marissa Mayer takes cost-control steps including firings.

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