Not everything is a Tech stock.
It certainly feels that way sometimes.
And we can absolutely make an argument that many publicly traded companies are directly or indirectly “Tech” stocks.
But they’re not.
Amazon.com (AMZN) is not a Tech stock.
Tesla (TSLA): not a tech stock.
Alphabet (GOOGL), formerly known as Google, is not a tech stock.
Meta Platforms (META)… Netflix (NFLX)… Uber Technologies… Not Tech stocks.
There can only be so many stocks in any given sector.
That includes the Technology Sector Index.
What Is Technology?
While there are many different variations of Tech indexes, including the New York Stock Exchange indexes, Russell indexes, and others, for purposes of this discussion we’ll focus on the S&P indexes.
These are known around Wall Street as the GICS, or Global Industry Classification Standard.
There are “officially” 11 S&P sectors, including Technology. You also have Consumer Discretionary, Financials, Industrials, Energy, Utilities, and more.
Tech is just one of them. It can only be one.
Granted, it’s the biggest one – by far. But still only one.
Microsoft (MSFT) carries the largest weighting in the S&P Technology Index, representing 14.2%. Nvidia (NVDA) represents 13.8%, and Apple (AAPL) has a 12.6% weighting.
The percentages drop after the Big Three, with Broadcom (AVGO) at 5.1% and Palantir Technologies (PLTR) at 2.9%.
Amazon has a 0% weighting in the Tech Index. Tesla, 0%. Meta, 0%. Alphabet, 0%.
Netflix, Uber, and many other stocks you might consider “Tech” have zero representation in the official sector.
What Are These Stocks Then?
Well, if these stocks aren’t “Tech,” what are they?
Alphabet and Meta – the artists formerly known as Google and Facebook – are the two largest components in the Communications Index, each representing about 16%.
Netflix is No. 3 with a 7.6% weighting in Communications.
Amazon and Tesla are in the Consumer Discretionary Sector, despite all their technological advancements. One is a retailer, the other makes cars.
Uber Technologies is a logistics company, so it’s with the Industrials. UBER was also added to the Dow Jones Transportation Average last year as well. Fun fact!
You still hear people referring to any mega-cap stock that uses technology to run their business as a “Tech” stock.
There are Tech stocks, and there are companies who use technology.
To be fair, what company these days doesn’t use technology?
Beware when you hear “Tech” stocks are reporting earnings, or “Tech” stocks are selling off.
Most of the companies they’re referring to don’t have any weighting at all in the S&P Technology Index.
They’re just making it up.
That’s what people do, especially in the mainstream media.
Think basic cable television programming, parading around as “business news.”
Think old-school newspapers and magazines struggling to hold eyeballs and advertisers.
They’re desperate types, and they’re misleading you – deliberately.
They’re wrong, and they want you to be wrong too.
Don’t let it happen. Know your GICS.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs