As Nvidia and other tech stocks soar, experts downgrade the sector on overvaluation concerns – Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN)

The technology sector, which has been the main driver of recent stock market gains, was lowered by Truist Chief Strategist and CIO, Keith LernerThe move comes amid concerns about overvaluation and subsequent recommendations to invest in alternative sectors.

What happened:Lerner recently downgraded the technology sector from “overweight” to “neutral,” citing concerns about its current valuation. The move follows an 11% outperformance of the sector over the past month, Business Insider reported Monday.

However, Lerner remains optimistic about the long-term prospects for the technology sector, particularly in the area of ​​artificial intelligence.

“There will likely be a better opportunity to make a meaningful investment of capital, and we will look for a better entry point to modernize the sector in the future,” Lerner wrote in the note.

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Truist is now shifting its focus to sectors that are indirectly benefiting from the AI ​​boom, such as communications services and utilities. These sectors are seeing increased demand due to 5G infrastructure investment initiatives and data center energy consumption.

The change comes amid a surge in US technology stocks, including NVIDIA Corp NVDAhave posted huge gains this year. Nvidia is up 156.47% year to date. Meanwhile, the “Magnificent Seven” tech stock —Microsoft Corp MSFT, Apple Inc AAPLNvidia, Meta Inc Platforms FINISH, Tesla Inc TSLA, Amazon.com Inc AMZNAND Alphabet Inc. GOOG, GOOGLE—have increased by about 57% over the past year.

Why is this important?:Truist’s ratings downgrade comes at a time of mixed signals about the future of the technology sector. Wedbush analyst Dan Ives recently predicted a 15% increase in tech stocks in the second half of 2024, fueled by expanding AI use cases. Ives believes the tech bull market has longevity, suggesting the current AI boom is far from over.

However, not everyone shares this optimism. Economist Harry Dent warned of an impending market crash, predicting the S&P 500 could fall 86%. Dent’s cautious stance underscores the potential risks of the current market environment, which he believes is in a “everything” bubble.

Adding to this complexity, Goldman Sachs predicts a flat return for the S&P 500 through the end of the year, suggesting the market may have already peaked. This contrasts with more optimistic views from analysts such as Ives and Gene Munsterwho predict that the bull market in the next three to five years will be driven by artificial intelligence.

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This story was generated by Benzinga Neuro and edited by Kaustubh Bagalkote