Trading Momentum Over Valuations: What Investors Need to Know About Big Tech Stocks – Insights from CIO Patrick Armstrong

Investors Should Focus on Trading Momentum in Big Tech Stocks


Investors should focus on trading momentum rather than worry too much about lofty valuations in Big Tech stocks, according to chief investment officer Patrick Armstrong. Armstrong manages the Plurimi AI Global Equity Strategy and believes that the recent rally in the S & P 500 led by the tech sector may be overdone. However, he still emphasizes that he has no plans to sell Big Tech.

Market Performance

The technology component of the S & P 500 has rallied by 38% this year, making up 28% of the total index. This has been driven by expected demand for artificial intelligence-related services in the future. In contrast, the rest of the S & P has only seen 1.5% returns so far this year.


Big Tech valuations have pushed the index’s forward average price-to-earnings ratio to 21 times, its highest level since 2004. Despite concerns about these steep valuations, Armstrong is not selling yet for two reasons.

‘Great Momentum’

Armstrong believes that understanding market momentum is crucial for investment decisions, even with shaky fundamentals. He cites tech giants like Microsoft, Apple, Adobe, Fortinet, and ASML as having great momentum behind them, and understands why people want to own them. Armstrong has learned from past experiences, where selling expensive stocks only caused them to become even more expensive.

‘Dead Money’ in a Recession

Armstrong suggests that if the economy slips into a recession, the recent tech rally could result in a period of stagnation. Big Tech stocks may struggle to grow into their lofty valuations, becoming “dead money” and leading to a catch-up trade. While he acknowledges this risk, he believes it is important to let the stocks run for now.

Short Positions

Armstrong warns of risks in other parts of the technology sector and reveals that he has short positions in electric car makers Rivian and Nio, as well as German online food delivery firm Delivery Hero. Short positions allow investors to benefit when a stock falls in price.


In conclusion, Armstrong advises investors to prioritize trading momentum over valuations in Big Tech stocks. While he acknowledges the potential risks, he sees potential for continued growth in this sector.

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