"Tech Stocks' 10-Year Golden Age Ends"... Investors Shift Focus to Value Investing

S&P500 IT Sector Index Plunges 20% This Year
Top Performers Apple, Amazon, Alphabet Also Plummet
Investors Withdraw Funds from Tech Stock Funds, Shift to Value Investing

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyun-jung] Major tech stocks have experienced their largest drop in a decade, leading to assessments that their "golden era is over." Investor interest is shifting toward traditional value stocks like Coca-Cola and related funds.

On the 8th (local time), the Wall Street Journal (WSJ) reported that the S&P500 Information Technology sector index has fallen 20% since the beginning of the year through the 7th. This decline is the worst in 20 years since 2002. During the same period, the S&P500 index dropped 14%, showing a 6 percentage point gap. This is also the largest divergence in 18 years since 2004.

Capital outflows are accelerating as well. Through April this year, $7.6 billion (approximately 9.57 trillion KRW) has been withdrawn from tech-focused mutual funds and exchange-traded funds (ETFs). This is the largest amount in 29 years since Morningstar Direct began compiling related data in 1993.

From cloud computing to software and social media, tech stocks have driven the market over the past several years, fueled by investor enthusiasm. Additionally, the Federal Reserve's liquidity expansion in response to COVID-19 stimulated investors' appetite for more aggressive investments.

However, investors are facing a completely different environment this year. Treasury yields have surged to their highest levels since 2018, and bond prices have fallen. The previously heated atmosphere around options trading, special purpose acquisition companies (SPACs), and cryptocurrencies has rapidly cooled. Within the S&P500, only the energy and utilities sectors are showing strength.

Some analysts say the decade-long golden age of tech stocks has ended. Investors seeking value stocks, which are priced lower relative to earnings and financial statements, are showing renewed enthusiasm. Traditional value stocks like ExxonMobil, Coca-Cola, and Altria are also rebounding and gaining momentum.

In fact, the S&P500 Value Index is outperforming the Growth Index by 17 percentage points, the largest gap since 2000. According to data provider EPFR, over $48 billion has flowed out of growth stock funds, while more than $13 billion has flowed into value stock funds. Chris Covington, Chief Investment Officer at AJO Vista, described this as "a change in the market regime."

This year, tech stocks have repeatedly suffered record-breaking crashes, with market capitalizations evaporating by hundreds of millions of dollars within hours. At the end of May, Snap shares plunged 43%, losing $16 billion in market cap in a single day. Fintech companies Affirm Holdings and Coinbase Global also saw their values halved. Other popular big tech stocks, including Meta (Facebook's parent company), Amazon, Apple, Netflix, and Alphabet (Google's parent company), all experienced double-digit declines.

This content was produced with the assistance of AI translation services.