Deutsche Bank upgrades US tech, says selloff has gone too far

Deutsche Bank Turns Bullish on US Tech Stocks After $2 Trillion Selloff

Deutsche Bank's Reversal and Market Context

Nov 2 (Reuters) - Deutsche Bank turned bullish on US technology stocks, reversing a downgrade made three weeks ago, saying a sharp selloff has created an attractive buying opportunity and much of the AI-related risk was already priced in.

More than $2 trillion was wiped off the Nasdaq 100's market value last month, as investors reassessed AI-related investments and growth expectations.

Key Takeaways from Deutsche Bank's Friday Note

Here are more details from the brokerage's Friday note:

Recent Performance of Tech and Mega-Cap Growth Stocks

• Tech and mega-cap growth stocks have lagged the rest of the S&P 500 by more than 16 percentage points over the past three weeks, falling about 11% while the broader index rose nearly 6%, leaving the sector near the low end of its historical trading range

Impact of "Magnificent Seven" Results

• "Magnificent Seven" results reinforced investor concerns about the pace of returns from heavy AI spending, contributing to recent weakness in large-cap technology stocks

Technology Sector's Relative Performance

• Technology's relative performance has fallen to the bottom of its long-term range, a level that has marked attractive entry points in recent years

Historical Rotations and Potential Gains

• Previous rotations back into tech have resulted in average gains of about 32% and roughly 30 percentage points of outperformance versus the rest of the S&P 500

Equity Positioning and Investor Opportunity

Room for Increased Exposure

• Overall equity positioning remains relatively light despite solid earnings growth, leaving room for investors to increase exposure if corporate profits remain resilient

(Reporting by Rashika Singh in Bengaluru; Editing by Harikrishnan Nair)