Where Tech Trades Could Go Now That the Fed is Taper
A rate-cutting cycle from the Federal Reserve could bode well for some tech stocks. The market is bracing for a long-awaited rate cut from the central bank on Wednesday after more than two years of sharp hikes to stem the spread of stubborn inflation. It would end one of the most aggressive tightening periods in recent history. Tech stocks have enjoyed another boom year as the AI push shows no signs of waning, but central bank easing could bring further gains as earnings look set to benefit from lower borrowing costs. Three months after a cut could also help the tech-heavy Nasdaq Composite, which tends to rise more than 6% on average in the three months following the first cut in a policy cycle, according to data from Canaccord Genuity. The index has risen more than 13.2% and 19%, respectively, six months and a year after the initial cut, the firm noted. The index is up more than 17% so far this cycle. To find potential tech winners this cycle, CNBC looked at the average performance of S&P 500 information technology members since 1984 in the three months following the Fed’s first cut. Here are some of the biggest winners and losers after a rate cut: Western Digital has gained an average of 26.6 — the most of the group — in such a scenario. The chip storage company’s stock has risen nearly 26% this year, benefiting from ongoing AI gains. Apple is another big winner after rate cuts, rising an average of 16.2%. The tech giant’s stock is up 12% this year, though it has fallen nearly 6% since the start of September. Earlier this month, Apple unveiled its iPhone 16, which includes long-awaited AI capabilities called Apple Intelligence. Shares have fallen back as investors worry about whether new product features will be enough to entice shoppers to upgrade. AI chipmaker Advanced Micro Devices has also benefited from the rally, rising an average of 11.4% over the past year. Shares of rival AI chipmaker Nvidia have gained less than 2% this year and ended Tuesday trading down nearly 29% from their highs in early March. To be sure, not every tech stock will rally in the face of a retrenchment cycle. Micron Technology has fared the worst of the bunch, falling an average of nearly 14% in the three months following its initial retrenchment. Micron shares have benefited from increased memory demand recently fueled by excitement about AI. Shares have risen about 3.5% this year. They are now down more than 42% from their highs. Other companies likely to lose money after the rate cut include Analog Devices, Teradyne and IBM.
