Technology: Sector Appears Overvalued Despite Birth of First Trillion-Dollar-Market-Cap Stock in Apple

• We view the technology sector as overvalued overall at a market-cap-weighted price/fair value of 1.075.
• Enterprise cloud computing remains the most important story in tech.
• The U.S.-China trade war continues to add risk to tech investments.
• Semis and software are still sectors to watch on the M&A front.

We view the technology sector as slightly overvalued overall at a market-cap-weighted price/fair value of 1.075 as of Aug. 31, versus 1.02 at the end of May, 1.05 at the end of February, and 1.08 at the end of November 2017. The Nasdaq index has risen about 3% from mid-June to mid-September and is up about 16% year to date as of mid-September. We can’t look at market capitalizations in technology without noting the birth of the first trillion-dollar-market-cap company as Apple crossed the barrier this quarter.