MW Tech stocks are making a comeback, but it doesn't look sustainable. Here's how to play the sector.

By Laila Maidan

Experts recommend sticking to large-cap stocks, having conviction in your picks and looking for short-term yield opportunities

The tech trade has been making a comeback, which could make it seem like the stock market is on the mend. But the broader universe of stocks hasn't kept up, and that means investors should tread carefully.

Investors have been piling back into Big Tech stocks. The Roundhill Magnificent Seven exchange-traded fund MAGS is up 32% since April 8, when it saw its lowest close so far this year. The MicroSectors FANG+ ETNs FNGS, which tracks 10 heavily traded industry leaders in tech, internet and media, closed at a record high of $61.76 on Friday, according to Dow Jones Market Data. The exchange-traded note is up by almost 37% since April 4, when it saw its lowest close this year.

But here's the thing: While money is coming back into the stock market, it's going to a handful of Big Tech names. In other words, this isn't the rising tide that lifts all boats, said veteran stock trader Mark Minervini.

Looking at the stocks in the tech-heavy Nasdaq, only 38% closed above their 200-day moving averages as of Monday's close, according to Dow Jones Market Data. While that was the highest number of stocks trading above their respective 200-day averages since Feb. 28, when 40% closed above that level, it's not enough to suggest the market is in a positive trend. And that's an important detail, Minervini noted, because it may be difficult for the stocks that are above their 200-moving day average to sustain their momentum if the majority of the market hasn't followed that positive trend. At least 50%, but preferably 60%, of Nasdaq stocks need to flip above their 200-day moving averages for the market to become healthier, he added.

The Big Tech recovery is a likely byproduct of investors wanting to maintain exposure to the artificial-intelligence trade while being selective by sticking to the part of the market where there's enough liquidity, or trading activity, to allow them to exit if they need to, Minervini said. This is because the uncertainty around the macroeconomic environment caused by the trade wars still poses a risk.

Therefore, investors need to be careful about buying stocks that are more speculative, because it's still a risk-off environment, a term used to describe a period when investors move away from stocks and lean into bonds, and even hold some cash on the side. For this reason, Minervini noted that it's not a time to try to outperform the market, but rather to stick to the large-cap names as long as they maintain their uptrend.

It makes sense that investors are sticking to the Big Tech trade, since that is what has worked, said Jerry Sneed, managing partner at Third View Private Wealth. So if you're already invested in the group of stocks known as the Magnificent Seven, stay invested but understand what you own, he added. The reason for that is twofold: First, investing in the AI trade is a long-term play, not a short-term one, which means there must be a willingness to accept the volatility and the time it takes for a company to reach its potential. Second, investors who understand the key drivers of a company's success and its risks are less likely to panic sell on day-to-day headline news, because they are looking ahead.

Sneed's statement even applies to Tesla Inc.'s stock $(TSLA)$, which has experienced increased volatility due to Chief Executive Elon Musk's involvement in politics. Last week, a war of words erupted on social media between Musk and President Donald Trump, and while Tesla's stock has rallied in the past two sessions, it's still down 7% since Wednesday's close, before the feud began.

Musk has become such a polarizing figure that investors might have a hard time wrapping their heads around the advice to hold the stock. But if someone is already invested and don't have a problem with the political side of things, Sneed said, at this point they shouldn't sell ahead of the company's planned robotaxi launch in Austin, Texas. This is because the event will be one of the milestones along the path to the company's growth in autonomous vehicles - and likely a big reason an investor has held on through the volatility thus far. So, he asked, why sell now? His comment isn't a recommendation to go out and buy the stock, but rather a reminder of why having conviction when investing is important.

However, to offset the volatility and uncertainty of today's macroeconomic environment, investors need to add short-term bonds or certificates of deposit, Sneed said. It's a way to park the cash that may be needed in the next 12 to 18 months in a safe place where it can still generate a small yield but remain accessible so investors don't have to sell a more volatile stock at a bad time in the market.

-Laila Maidan

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June 10, 2025 09:36 ET (13:36 GMT)

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