MarketMoodz
Trivariate Research upgrades tech to outperform on earnings momentum
Trivariate Research has upgraded the technology sector to outperform from market perform, citing stronger earnings momentum and a favorable 24-month outlook. Adam Parker argues the sector could break through this year's gloom as AI demand and earnings power support continued tech leadership. Nvidia and Micron are highlighted as key drivers, potentially guiding an AI-led portfolio tilt.
Key Takeaways
- Tech is upgraded to outperform as earnings momentum strengthens into 2026.
- Nvidia and Micron drive a large share of Q1 2026 YoY S&P 500 growth, underscoring AI hardware's impact.
- The sector is forecast to post about 43.1% earnings growth in 2026.
- Forward P/E could reach around 16.35x by year-end under a 35% earnings-growth scenario.
- Investors may overweight tech, but should monitor software obsolescence risk and memory supply dynamics.
People Involved
- Adam ParkerFounder, Trivariate Research
Entities Involved
- Nvidia Corp. (NVDA)AI hardware leader driving tech earnings momentum
- Micron Technology, Inc. (MU)Memory-chip supplier supporting AI demand
- XLKTechnology sector ETF serving as performance reference
MarketMoodz Analysis
The upgrade suggests investors may tilt portfolios toward tech, especially AI-enabled hardware and software beneficiaries like Nvidia, if earnings momentum persists and a robust 24-month outlook materializes. The note cites a 4.2% rise in the S&P 500 tech sector in 2026 and positions tech as a potential leader even as other sectors take the gains early in the year.
From a longer-run perspective, tech has shown it can re-rate on earnings power when AI cycles run hot, with the 2018 forward P/E around the 16.4x level cited as a potential bookmark should earnings growth surprise to the upside. The focus on Micron and Nvidia underscores how AI hardware supply dynamics can disproportionately influence broad-market earnings, even if software exposure faces obsolescence risk.
What to watch next includes watching for confirmatory earnings prints from Nvidia and peers, continued AI demand signals, and any regulatory or supply-shock shifts that could accelerate or derail the current momentum. The claim set behind the upgrade comes from CNBC and is not independently verified in the notes, including the 43.1% 2026 earnings-growth forecast and the 25% EPS growth expectation for 2027, so investors should treat the numbers as directional and rely on corroborating sources as they become available.
Source: Original Article