Investors Bet Big on Big Tech Heading Into Year-End

The stock market continued its year-end rally on Monday, building on momentum from before the long holiday weekend. The S&P 500 (^GSPC -0.88%) set another record high, and gains for the Dow Jones Industrial Average (^DJI 0.56%) and Nasdaq Composite (^IXIC -2.05%) were equally impressive as Wall Street hasn't stopped believing in Santa Claus.

Data source: Yahoo! Finance.

Plenty of stocks were higher on the bullish day, but it was uncanny how many of the top stocks in the Nasdaq had powerful advances. That suggests that investors are betting on the market overall to keep outperforming in 2022, and they're trying to get a jump on what they hope will be a powerful advance when the ball drops on Jan. 1.

Image source: Getty Images.

Playing to win

Just looking at the Nasdaq leaderboard shows how well its biggest companies performed on Monday:

• Apple (AAPL -1.22%) was up more than 2%, pushing its market capitalization ever closer to the $3 trillion mark. Apple's latest iPhone model and other products appeared to be hits during the holiday season despite supply chain challenges, and economists are optimistic that consumer spending will remain robust for the foreseeable future. That should help keep demand high into 2022.
• Microsoft (MSFT -1.27%) also gained more than 2%. The software specialist has been bulking up lately, with good news concerning its long-pending acquisition of Nuance Communications (NUAN) and its more recent announcement that it will acquire digital advertising tech specialist Xandr from AT&T (T 1.10%).
• Meta Platforms (META -4.13%) picked up more than 3% on excitement about sales of its Oculus virtual reality (VR) headset during the holiday season. Demand for the Meta app, which helps drive the VR experience, topped the list of popular apps in the Apple App Store on Christmas Day, and investors took that as a sign that plenty of people were trying out their new toys.
• Tesla (TSLA -1.92%) gained almost 3% as the electric vehicle maker made a strategic move to disable video game play on its in-vehicle entertainment systems, which should help it avoid scrutiny from regulators at the National Highway Traffic Safety Administration.
• Finally, Nvidia (NVDA -10.01%) was up almost 5% on a good day for the semiconductor industry. The environment for high chip demand looks likely to continue indefinitely, and that was enough to send shares of Advanced Micro Devices (AMD -5.44%) up more than 5% as well.

Making a play

The popularity of the Nasdaq in recent years has been understandable, given the index's outperformance. Investors see no end in sight to the rally there, as the Nasdaq 100-tracking exchange-traded fund (ETF) Invesco QQQ Trust (QQQ -2.07%) has grown to more than $200 billion. That puts it in the top five with three S&P 500-tracking funds and one total stock market ETF.

What's even more interesting is that the Nasdaq isn't even at a record high. Indeed, other industries within the S&P 500 have played a role in helping that index reach records, while many Nasdaq tech innovators remain well below their early November highs after a steep downturn.

Currently, investors seem pleased with the tension between the threat of inflation and higher interest rates and the strength of the global economy. Moreover, with many seeing tech stocks as win-win candidates regardless of what happens on the macroeconomic and pandemic fronts, the Nasdaq is likely to get even more popular as the calendar turns next week.