Bond Yields Boost Tech Stocks as Valuations Become More Attractive
Tech stocks are on the rise despite concerns about the financing landscape for cash-burning companies.
CNBC’s Deirdre Bosa reports that even unprofitable tech companies are seeing gains, thanks to a sharp move in bond yields.
When rates are higher, future profits appear less valuable, but the reverse is true as yields drop.
This dynamic is playing out in real time, with the NASDAQ outperforming in today’s session and tech one of the top S&P sector gainers.
Apple, Microsoft, and Amazon are among the big tech companies with fortress-like balance sheets that are outperforming in the session.
However, Bank of America warns that the collapse of Silicon Valley Bank could set up a big tech versus smaller tech dynamic.
They suggest that better-capitalized tech companies such as Microsoft, Adobe, Dell, Amazon, Google, and Accenture could come out ahead over less well-capitalized companies.
Morgan Stanley also warns that the fallout could exacerbate cloud software consumption weakness versus stronger security dynamics.
While these are short-term trends, longer-term questions remain about the fundraising landscape.
Valuations have become increasingly higher, and the funding environment is likely to become more difficult.
Companies may also have difficulty opening accounts as Silicon Valley Bank, which catered to the tech ecosystem, goes under.
Big funds like Softbank’s Vision Fund may also have to mark down their portfolio companies earlier than they might have liked.
The collapse of Silicon Valley Bank is likely to have far-reaching implications for the tech industry.
It remains to be seen how these will play out in the coming months and years.
