Newsflash, not. Technology stocks are surging.
April’s 18.3% gain was Information Technology ETF’s (VGT) best monthly return since its 2004 inception. It followed that up with a 17.3% return in May—its second-best month. Put those together, and the sector ETF is up 38.8% over the past two months. Gains like that were last seen during the late-1990s tech bubble.
Cut the technology sector more finely, and semiconductor stocks have been on fire. iShares Semiconductor ETF (SOXX) is up a whopping 73.2% over the last two months. This semiconductor rally has minted three new trillion-dollar market-cap stocks: Micron Technology in the U.S. and SK Hynix and Samsung in South Korea.
On the one hand, it is good to see the AI story broaden beyond the original winners (like NVIDIA). On the other hand—and I probably don’t need to say it—the pace of these gains is not sustainable. Plus, the semiconductor industry is notoriously cyclical.
That doesn’t mean the wheels are about to come off the market or that you need to hit “delete” on the technology stocks and tech-heavy funds in your portfolio.
It means you need to keep your expectations in check. It’s great to celebrate your recent wins, but now is a good time to assess your portfolio’s makeup; if technology stocks now make up a larger-than-intended share, pare them back.
That’s not a new message, but it’s worth repeating after the remarkable gains earned over the past two months. And if you’re looking for tech-heavy funds to trim, my article on the technology footprint in Vanguard’s funds is a good starting place.
Hard to Own
One other message worth repeating: Even big stock market winners are hard to own, particularly when they aren’t winning.