Investors See Tech Catch-Up Trade, Small-Cap Strength After Labor Day

According to CNBC, investors are looking for a shift in market leadership after Labor Day as the QQQ ETF, which tracks the Nasdaq-100, has been flat since Memorial Day, while the VanEck Semiconductor ETF (SMH) and the Roundhill Magnificent Seven ETF (MAGS) have slipped slightly over the same period. The S&P 500 is up about 3% since then, and September brings several potential market catalysts, including a Federal Reserve rate decision, a meeting between President Donald Trump and Chinese President Xi Jinping, and an Apple product launch event under new CEO John Ternus. Dan Ives of Yorkville Ives said he expects a catch-up trade in tech, with investors rotating into infrastructure, cybersecurity and software rather than the hyperscalers. He said the “SaaSpocalypse” was a fictional narrative. Tina Byles Williams, founder and chief investment officer of Xponance, said compute still dominates artificial intelligence spending and that data centers, power, networking and cooling are becoming major bottlenecks. Nicolas Janvier of Columbia Threadneedle said small caps look attractive, citing 78% earnings growth in the second quarter for the Russell 2000 and saying continued earnings growth could support further outperformance. Other investors pointed to housing, commodities and basic materials. Jimmy Lee of Wealth Consulting Group said lower rates could help Home Depot and Lowe’s as housing activity improves. Michael Persaud of Morgan Stanley said he favors exposure to gold and silver as portfolio diversifiers. Steve Sosnick of Interactive Brokers said copper and other basic materials could benefit if the AI buildout continues. A Long Angle poll of 417 responses from members with portfolios between $5 million and $100 million found 53% are focused on U.S. equities. Tad Fallows, Long Angle’s founder, said many members have large gains in tech stocks and that Alphabet is the stock they would buy today and hold for a decade. He also said natural gas and related stocks could benefit from rising electricity demand tied to data centers. Charlie Garcia of R360 said members remain bullish on equities, especially defense, and are also investing in cryptocurrency as a way to play agentic AI.