President Trump has taken action to supercharge U.S. technology stocks. He loosened restrictions on chip exports to China and enabled companies to expense R&D costs immediately. These moves fueled a 35% gain in the Technology Select Sector ETF (XLK) over the past three months, far outpacing the 19% rise in the S&P 500.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
Gigantic names like Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Amazon (AMZN) and Alphabet (GOOGL) are the main beneficiaries. Nvidia saw renewed access to the Chinese market while Microsoft and Amazon received a boost from faster tax refunds and clear support for artificial‑intelligence investments.
R&D Tax Perks and AI Infrastructure Takeoff
A major win for Big Tech came when companies were given permission to expense all domestic research and development costs in the same year they occur. Firms like Alphabet, Amazon, Meta (META), and Microsoft, which together account for almost half of R&D spending in the S&P 500, stand to receive substantial cash‑flow gains from this immediate tax benefit.
On top of that, the White House has encouraged AI infrastructure growth. Leaders touted nearly $92 billion in AI and data center investment, and officials have signaled easier permitting for new projects. These policies are inviting further expansion of cloud and AI firms such as Salesforce (CRM), ServiceNow (NOW), and Nvidia.
Dollar Weakness Adds to Earnings Tailwinds
Trump’s trade and tariff tactics have softened the U.S. dollar. That move favors tech firms that earn nearly 55% of their revenues abroad. A weaker dollar means overseas income boosts profits when converted back into dollars, lifting valuation reports for the entire sector.
These favorable currency conditions give stocks like Apple, Nvidia and Microsoft an extra edge in their earnings numbers.
Bubble Risk Looms Large
Despite these gains, valuation alarms are ringing. The top ten firms in the S&P 500 currently trade near 30 times forward earnings, which is even higher than dot‑com bubble levels. Analysts at UBS highlight that almost every signal of a classic financial bubble is now in place while the Federal Reserve has yet to act to cool down markets.
They warn that without cautious guidance, this rally could spin into a dangerous bubble.
Now the focus is on the Federal Reserve. If rate cuts begin this year, tech gains could grow even stronger. However, any new tariffs targeting semiconductors, AI chips or overseas trade could shake confidence and cut sector earnings sharply.
Investors looking to dig deeper into Big Tech’s performance can use the TipRanks Stocks Comparison Tool to view analyst ratings, price targets, Smart Scores, and valuation metrics across top names like Meta, Amazon, Apple, and Nvidia. The tool makes it easy to stack these stocks side by side. Click on the image below to explore the tool.
