Does Big Tech Have Limited Upside?

With positive earnings out for big tech companies, should investors’ appetites grow for companies like Google (GOOGL), Microsoft (MSFT) and Amazon (AMZN)? Or should they look for more potential elsewhere?

This can be a very loaded question, as many people have favored these companies for a long time.

As the pandemic unfolded, many new companies profited as their innovation shined in this new environment. Even companies that didn’t necessarily innovate, but were well-positioned for a pandemic environment, got a large boost. Companies that helped people, shop, work and recreate have been a huge focus.

With that said, large tech continues to hold up in the current market, but why buy large tech when we’ve seen even greater potential in small tech? Let’s take MSFT, which is up around 7-8% since its past November high and 3D Systems (DDD) which has increased 450% percent since its November high. Or, looking at AMZN, that stock hasn’t had nearly any change in price since its November high. Even Google’s 16% gain since November’s highs pales in comparison to ViacomCBS (VIAC), which booked at 100% gains at its peak.

When companies such as the aforementioned are as saturated and bloated as they are, the upside potential is limited. On the other hand, the newer and sexier (if you will) companies have lots of blue skies potential.

How likely is it for a company like Google to double in price? Wouldn’t you rather find new tech companies that have much greater potential than commit large amounts of money to huge companies that have limited upside?

  • S&P 500 (SPY): 385.85 resistance
  • Russell 2000 (IWM): Resistance 217.91
  • Dow (DIA): 50-DMA at 303.65 Flirting with the 10-DMA at 306.60
  • Nasdaq (QQQ): 330.32 to resistance with 50-DMA support at 311.05
  • KRE (Regional Banks): Support 53.26. Resistance 59.86
  • SMH (Semiconductors): 246.79 resistance. Support 222.34
  • IYT (Transportation): 222.67 50-DMA resistance
  • IBB (Biotechnology): 168.51 resistance
  • XRT (Retail): Inside day

Mish Schneider

Director of Trading Research and Education

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education