Hedge fund investor Dan Niles said megacap tech stocks that led the market rally last year will have to start proving themselves this upcoming earnings season. “You’re going to need these companies to start putting up numbers,” Niles, founder and senior portfolio manager of the Satori Fund, told CNBC’s “Fast Money” on Monday, adding, “I think the rubber hits the road with this earnings season.” Megacap tech stocks were far and away the market leaders in 2023, buoyed for the better part of the year by enthusiasm over artificial intelligence, and then later riding a year-end surge in market exuberance following a dovish pivot from the Federal Reserve. Nvidia shares ended last year with a more than 200% advance; Apple closed up nearly 50%. But investors are concerned names have gotten too expensive after they struggled to start the year. Apple shares slid 6% last week after several firms downgraded the stock, citing weaker iPhone sales. On Monday, however, Apple shares rallied more than 2% as investors bought the dip in tech stocks. Meanwhile, Nvidia shares climbed more than 6%, reaching all-time highs. Niles said he’s still an owner of Nvidia shares, which he expects is “a good place to be” even with a forward price-to-earnings multiple upwards of 29. He expects the chipmaker will continue to beat and raise on expectations for the next two quarters. But the tech investor is less enthusiastic about Apple, even as it trades at a 28 forward P/E, as he expects it will report lower growth. Niles said there will be opportunities in megacap tech stocks this earnings season for choosy investors. “The good news is this is going to be stock pickers’ nirvana, I think, this next year,” Niles said. “Because you’re not going to get stocks, right, just because you go, ‘Oh, it’s Apple, it’s big, the chart looks good, buy it.’ You’re going to actually have to get the fundamentals right to make money.”
