Relative Momentum of Mega Cap Tech Stocks Needs to Fade to Bring Them Back to Historical Valuations

The NDR Elite Eight stocks (META, AMZN, NFLX, MSFT, AAPL, GOOGL, NVDA, TSLA) now make up 28.4% of the S&P 500 market cap (top chart), while its share of earnings has dwindled to 17.2% (middle chart).  

As a result, the gap between the group’s share of market cap and earnings has blown past prior highs (bottom chart). 

Going forward, NDR points out the price trend of stocks will need to underperform or see relative earnings growth reaccelerate to bring valuations closer to the historical average.