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Megacap technology stocks have led most of the 2023 market rally, and it might be time to take some chips off the table, according to one of Wall Street’s top technology analysts. Bernstein’s Toni Sacconaghi is advising clients to look to take profits on this year’s leaders opportunistically. Sacconaghi is rated consistently as the No.1 analyst on IT hardware and electronics manufacturing services by Institutional Investor. “Our analysis of historical periods of very concentrated market performance reveals that performance of the broader market holds up ok, but that the strongest contributors typically underperform, suggesting that investors may want to selectively look to take profits on this year’s leading contributors,” the analyst said in a note Monday. He noted that stock picking increasingly matters when market concentration is so high. The 10 largest tech companies now account for nearly 65% of tech’s total capitalization. Investors flocked to tech stocks, especially the ones tied to the artificial intelligence boom, in the first half of the year. Nvidia and Meta each more than doubled in price during the first six months of 2023, while Apple , Microsoft, Alphabet and Amazon rallied at least 35% each. The rally has stabilized and, in some cases diminished, as fears of rising rates resurfaced. Apple has fallen 10% in the second half, while Microsoft and Broadcom have given back about 6%. Still, Bernstein kept its neutral rating on tech stocks, adding that investors should turn to quality shares that are more undervalued. “We maintain our market weight in tech, and encourage investors to look for selective opportunities across both sides of the barbell — inexpensive value names and select quality growth names with a high likelihood of achieving expectations,” Sacconaghi said. — CNBC’s Michael Bloom contributed reporting.
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