Goldman Sachs (NYSE: GS) tracks a basket of money-losing technology companies that surged 27% in May, outperforming the Nasdaq 100 Index by 17 percentage points in its strongest showing since November 2020.
The group is now up 57% for the year, compared with an 11% gain in the S&P 500 Index, even as the basket rose around 0.2% during Monday trading after erasing early losses.
The rally has been driven by some of the market’s most speculative technology names, spanning several high-risk segments of the sector.
Space and satellite companies such as NextNav Inc. (NASDAQ: NN) have featured prominently, alongside smaller AI players such as BigBear.ai Holdings Inc. (NYSE: BBAI).
Drone makers have also surged, with Unusual Machines Inc. more than doubling in May alone, adding further momentum to the broader rally in unprofitable tech.
JPMorgan’s Market Intelligence desk, led by Andrew Tyler, warned that investors may want to be wary of the spiciest parts of tech, especially if bond yields stay elevated.
Tyler also pointed investors toward higher-quality technology companies, where buyback activity from larger and more profitable names could support a move away from the riskiest parts of the sector.
Mark Hackett of Nationwide said the gains in profitless tech and retail-favorite stocks show both retail and institutional investors reaching for higher-risk upside in the current environment.
Kieran Osborne of Mission Wealth Management cautioned that recent gains should not be read as proof that money-losing technology businesses are attractive over the long term.
The concern among analysts is that this rally may be less about business quality and more about investors chasing the most leveraged exposure to a rising market.
Rising borrowing costs, AI data-center spending, and renewed comparisons to the dot-com bubble are all hanging over the sector as a potential source of pressure.
With those headwinds in view, profitless tech could still produce individual winners, but the group may now be entering a more fragile and vulnerable phase of its run.
