The technology-focused Nasdaq 100 still has room to rally toward all-time highs near 16,771.
NAS100 – Daily Chart
The price of the NAS100 is currently 15,128 and has 2,000 points of upside to reach the resistance level.
According to Citibank’s US equity strategist, this year’s buzz around artificial intelligence has led to a narrow rally in the US stock market, and he now sees a “digestion phase”.
Technology shares have been rallying hard this year due to investor excitement over AI upside. The Nasdaq has now posted gains of 37% for its best-ever return for the year’s first six months. Microsoft and Nvidia have led the AI revolution and the market. Now investors are looking for the following winners in the new technology shift.
Other market watchers are concerned that a handful of stocks drive the rally. “We’ve got the euphoria around AI that’s driven the growth component of the market, whether it’s the Nasdaq components or a broader growth cluster,” Citi’s Scott Chronert told CNBC.
“This is not a broader market move. This is a very narrow move if you will from that perspective. It’s predicated on long-term promise. Our concern is that that long-term promise isn’t yet showing up in the fundamentals, it’ll take some time for that to happen – it’ll happen – but between here and there, we think we’re setting up for a bit of a digestion phase,” Chronert added.
Other analysts, such as JPMorgan’s top strategist Marko Kolanovic, have warned that the tech stock rally has been too steep and is creating an asset bubble.
“Typically with things like this, when only a small number of stocks are doing well, you get overvaluation and speculative behaviour — everyone pumps money into these stocks, and we have another tech bubble like we did in the late 90s and early 2000s,” Remi Olu-Pitan, of Schroders, told the FT. “You can argue that maybe we’re sowing the seeds of that.”
Despite the negative sentiment, traders have 2,000 points still to capture in the Nasdaq if it returns to the previous all-time high.
