A Goldman Sachs executive says global stock markets are undergoing a sharp shift away from the heavy concentration in US mega-cap tech stocks.
Rich Privorotsky, Head of European One Delta Trading at Goldman Sachs Global Banking & Markets, say After years of dominance, investors are increasingly moving away from the so-called Magnificent Seven.
He says the shift opens up opportunities in cyclical sectors and emerging markets.
“So I think it’s been a huge broadening of the trade so far. We should actually highlight the underperformance of big-cap technology and software. Particularly in software, you’ve seen massive derating, and I think that’s a result of innovations in AI and what’s happened very recently.”
Privorotsky says the pressure on big tech companies comes from heavy capital spending, reduced share buybacks, power and semiconductor restrictions, and increasing political control.
“We’ve started at this point of extreme concentration. If all of a sudden the future returns don’t look so compelling and the valuation looks a little high, moving a few dollars out of these companies and into everything else has a huge impact.”
He says the shift is visible in U.S. stock benchmarks, with equal-weight indices and smaller stocks outperforming while cyclical stocks gain at the expense of quality and long-term growth.
Privorotsky also pointed to strong demand in emerging markets as investors look beyond U.S. assets.
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