Tech risk-reward turns favorable after rout, Deutsche Bank says

Deutsche Bank has shifted its stance on global technology stocks, now classifying them as overweight following a recent market downturn and a decrease in investor exposure. The bank's analysts, including Parag Thatte and Chief Strategist Binky Chadha, argue that many concerns over AI demand have already been priced into stock valuations.

Over the past three weeks, technology stocks have underperformed the S&P 500 by over 16 percentage points, with the sector falling 11% compared to a 6% gain for the broader market. Investor positioning has also retreated to a more neutral stance, better aligning with anticipated earnings growth of around 10%. Deutsche Bank highlighted that previous rebalancing into technology had previously yielded an average return of 32%, outperforming the rest of the S&P 500 by 30 percentage points.

Despite the recent correction, the bank sees the current entry point as more favorable, although it acknowledges the potential for further downside in the face of additional external shocks.