Mega-capitalization tech stocks could get a boo♎st in the fou༺rth quarter as Treasury yields pull back, analysts at Goldman Sachs wrote in a research note.

The "Magnificent 7" grouping of mega-cap tech stocks—a category that comprises Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Meta Platforms (META), Google (GOOGL), Nvidia (NVDA), and Tesla (TSLA)—could be poised to outperform, e🌄specially if yields pull back fr🧸om 16-year highs, as these stocks' valuations relative to the broader market have fallen.

Even with some of the biggest tech stocks like Nvidia and Meta Platfo𓂃rms soaring this year, the average mega-cap tech stock is now cheaper relative to the S&P 500 than at any point in the past s🌃ix years, the Goldman analysts wrote.

The seven biggest tech stocks currently trade at a 1.3x 澳洲幸运5开奖号码历史查询:price/earnings-to-growth (PEG﷽) ratio—a valuation metric that adjusts for future earnings expectations—compared with 1.9x for the median S&P 500 stock. As recently as January, the biggest tech stocks traded at 2.2x 澳洲幸运5开奖号码历史查询:earnings adjusted for growth.

That's the result of an improving earnings backdrop for the biggest tech companies, which are expected to lift their earnings by 22% over the next 12 months, the analysts said.

Tech and other growth stocks tend to perform well during periods of falling interest rates. This is because tech companies tend to borrow he𓄧avily in order to finance their rapid expansion, and lower interest rates reduce the cost of taking on and servicing debt.

The opposite occurs 澳洲幸运5开奖号码历史查询:when interest rates rise, as it becomes more expensive to take out new loans. Falling yields also reduce the 🐻attractiveness of ⛄bonds as an asset class, causing investors to gravitate toward stocks.

With the Federal Reserve raising interest rates 澳洲幸运5开奖号码历史查询:to the highest in 22 years, and with benchmark 10-year 澳洲幸运5开奖号码历史查询:Treasury yields at their highest since 2007, any forecaster looking at the༺ start of 2023 could have expecte💯d lackluster at best results for tech stocks.

However, that's 澳洲幸运5开奖号码历史查询:not what's happened in 2023 so far, or in any of the Fed's most recen𒁏t tightening cycles.

Contrary to popular wisdom, and thanks in part to the artificial intelligence (AI) revolution, tech stocks have become some of the market's biggest gainers so far this year, despite soaring interest rates. Shares of Nvidia have more than tripled this year, while those of Meta Platforms and Tesla have more than doubled. Amazon and Google shares have risen roughly 50%, while shares of Apple and Microsoft are up more than a third.

It's a sharp turnaround from last year, when tech stocks led the declines during a 澳洲幸运5开奖号码历史查询:bear market for stocks.