Big tech likely to remain in driving seat on earnings strength: UBS

Investing -- Big tech has taken a breather from its recent melt-up, but the slew of positive earnings revisions for the group that helped kickstart the market rally since October suggests its grip on the market leadership remains strong.

"The data indicates that the market's advance, and its narrow leadership, are justified given the strength in earnings revisions over this period," UBS said in a note, referring to the positive earnings revisions seen since October for the six largest TECH+ stocks including NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms Inc (NASDAQ:META), Amazon.com Inc (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc Class A (NASDAQ:GOOGL), and Apple Inc (NASDAQ:AAPL).

Since October, earnings revisions for the largest 6 TECH+ companies advanced 8.9%, led by Nvidia, which accounting for just over half of gain. Apple, meanwhile, was the laggard, seeing a 0.3% decline in earnings revision amid worries about rising competition stifling iPhone demand.  

Looking to the rest of the year, the largest 6 TECH+ stocks are expected to generate EPS growth of 26.3%, UBS adds, dwarfing the 6.1% growth expected for the rest of the S&P 500. Nvidia is expected to generate 93.6% EPS growth, well ahead of second-placed Meta's 33.9%.

In a sign that this cohort of tech stocks is likely to remain favored, earnings expectations beyond TECH+ have declined by 3.0%, pressured by poor revisions in energy, materials, and health care, the bank added.