Morgan Stanley’s Andrew Slimmon predicts a comeback for large-cap tech stocks, despite recent underperformance. The shift towards industrials and cyclicals has left tech stocks treading water. The Industrial Select Sector SPDR Fund is up 2.80% while the Technology Select Sector SPDR Fund is down 0.33%.

The Magnificent 7, mega-cap tech leaders, have stalled even as earnings remain strong. Slimmon believes tech is undervalued compared to other sectors. The group dominates S&P 500’s capitalization, representing one-third of its weight and nearly 45% of the Nasdaq 100.

Slimmon argues that the Q4 sell-off in Big Tech was due to investors chasing safety amid rate-cut expectations. While industrial stocks require earnings to justify valuations, tech has earnings on its side. Big Tech reported strong earnings growth in Q3 and is trading at a discount compared to the broader market.

Recent stock market figures show momentum has cooled for Magnificent 7 stocks. Nvidia, the priciest stock, trades below its early 2020 level. Tesla, Apple, Nvidia, Microsoft, Meta Platforms, Amazon, and Alphabet have seen varying returns over the past six months.

In conclusion, Slimmon’s analysis points to a potential opportunity in large-cap tech stocks as valuations have cooled off despite strong earnings. The market sentiment may shift back in favor of tech, presenting a buying opportunity for investors.

Read more at Yahoo Finance: Morgan Stanley drops surprising message on tech stocks