Tech Giants Surge 13% in May, but Risks Loom

Deutsche Bank's May market review report highlighted a robust performance by technology stocks last month, driven by tariff reductions and economic agreements between the United States and the Middle East. However, the report also raised concerns about the sustainability of this upward trend. The report emphasized that, as in the past, the performance of the "seven tech giants" remains uncertain. These giants, which include major players in the technology sector, have shown significant growth but face challenges that could impact their continued success. The report suggests that while the recent gains are encouraging, investors should remain cautious and consider the potential risks associated with these stocks.

The report noted that the "seven tech giants" have been a key indicator of overall market sentiment. In May, this group of stocks saw a surge of over 13%, marking their best monthly performance since May 2023. However, the report cautioned that while U.S. stocks may continue to outperform European stocks in the short term, new uncertainties could disproportionately affect U.S. companies.

Prior to the trade truce between the U.S. and China, technology stocks had already begun to recover in May, buoyed by improving macroeconomic data and expectations of easing tensions. However, the report warned that renewed trade tensions with China and the overall uncertainty surrounding tariff policies could once again put pressure on technology stocks.

Deutsche Bank highlighted that trade policy remains a critical risk factor. A prolonged stalemate could disrupt global trade momentum, exacerbate macroeconomic volatility, and impact investor confidence through channels such as pre-tariff inventory stockpiling and import distortions. The report also noted that the fluctuating policy signals, combined with Moody's downgrade in May, could further erode investor confidence. The financing capabilities of the U.S. twin deficits would face stricter scrutiny, and the performance of the "seven tech giants" would continue to be a key indicator of U.S. economic resilience.

Among the "seven tech giants," Apple has seen the most significant decline, with a year-to-date drop of 19.5%. In contrast, NVIDIA, a favored AI chip stock, has continued its strong performance following the release of its first-quarter earnings report, which exceeded expectations. Despite increased export restrictions to China, NVIDIA's upward trajectory has remained unabated.