Recent market trends might suggest a pullback for several leading tech stocks after a notable rise this past week. Ever since President Trump announced tariffs in early April, many stocks experienced a downturn. However, things started to shift when various countries introduced temporary reductions in those tariff rates. Positive earnings reports, along with better-than-expected employment figures, helped to lift overall market sentiment. By the end of last week, all three major indices saw gains, marking their second consecutive week of upticks.
Notably, results from Microsoft and Meta have boosted investor confidence in the artificial intelligence sector. Despite potential tariff-related costs, these tech giants are continuing to invest heavily in data centers. Utilizing a stock screener tool, we pinpointed stocks that might be overvalued or undervalued through the 14-day relative strength index (RSI). When the RSI exceeds 70, it suggests a stock could be overbought, while readings below 30 might indicate overselling and the possibility of future gains.
Last week, Microsoft received an RSI score of 72.78, making it one of the most overbought stocks. Analysts, according to LSEG, set an average price target that suggests nearly 15% upside since Friday. Microsoft shares surged about 11% this week, surpassing Wall Street’s predictions and delivering robust forecasts, bringing its stock into the green for the year. The performance of their Azure units also exceeded expectations, fueling demand in the AI sector.
Other tech entities like Palantir, Verisign, and Netflix also showed increases, according to their RSI metrics. Palantir has seen a remarkable 64% surge this year, benefiting from defense and software contracts with major U.S. government agencies. Yet, LSEG analysts warn that Palantir’s stock could decrease by around 27% moving forward, with an RSI of 71.91 suggesting it could be nearing a limit. Meanwhile, both Netflix and Verisign hold RSIs above 74, with their stock performances outpacing the general market at increases of 29.8% and 37.3%, respectively. Netflix celebrated a record 11 consecutive days of growth, driven by excitement after its recent earnings beat.
On the other hand, stocks like UnitedHealth Group and Church & Dwight are showing signs of weakness, with RSIs of 25.11 and 27.78. UnitedHealth’s stock has dropped significantly since mid-April due to a steep cut in its annual profit forecast linked to unexpected healthcare costs, resulting in a nearly 21% decline this year.
