June 4, 2025: Technology Marches On, But Valuations Remain Rich

Following Nvidia’s earnings release last week, the market now has a fuller picture of key components from the Q1 2025 earnings season. One familiar theme stands out: large technology and media companies once again carried much of the S&P 500’s weight with strong bottom-line growth. Management commentary around continued investments in data center expansion and robust AI chip sales helped ease growing concerns about the sustainability of the AI-driven narrative.

Looking ahead into the second quarter, the market continues to rely heavily on the Technology and Communication Services sectors for earnings growth, while maintaining a more cautious stance toward the rest of the U.S. equity landscape, clouded by tariff concerns. According to Bloomberg, excluding Technology & Communication Services, the S&P 500 is projected to post a 2.8% decline in earnings, compared to 3.8% growth for the index overall.

Longer term, we must remain mindful that markets tend to price in forward growth early. New risk factors in popular themes can lead to swift valuation resets. Balancing growth and valuation through a well-diversified portfolio remains key.

Weekly Market Update: June 4, 2025