Tech Stocks

Apple makes up more than 18% of PowerShares QQQ. If Apple wobbles, the effect on broader market could be significant. Even if bubble talk is over the top, a higher share price is justified only if Apple continues to meet earnings expectations. That usually gets harder. The stocks of market-leading companies historically underperform once they have reached the top slot, since they are less nimble and more vulnerable to attacks by regulators and the press. It is harder to continue impressive earnings growth on a large base. This has already happened to Microsoft, Intel and Cisco Systems when their market capitalisations peaked at around $500B-$600B. Even a small earnings miss could have a big effect on the share price, since more of Apple’s shareholders today are fickle traders.