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The S & P 500 is “supported” by just seven mega-cap tech stocks right now — and it’s starting to look a lot like the 1990s tech bubble, one analyst told CNBC on Wednesday. “The S & P 500 [is being] supported by a few expensive mega cap techs,” said Eric Lynch, managing director of Scharf Investments. Seven companies — Apple , Microsoft , Nvidia , Meta , Tesla , Amazon and Alphabet — account for 95% of the S & P 500’s total return in the first quarter, he noted. “To us this looks a lot like the tech bubble in 1990s when tech gave the world massive outperformance over value, over mid cap small caps, international stocks,” he told CNBC’s ” Street Signs Asia. ” “Effectively, once the bubble burst there were all these asset classes that had really attractive valuations.” Though Lynch said that doesn’t necessarily mean history is going to repeat itself, he added that valuations are — as they were then — a lot more attractive outside of the growth stocks. “What’s interesting is international stocks are much cheaper,” he said. Stock picks Lynch named three stocks he said are cheap right now. Two of them are Asian stocks: Chinese search engine giant Baidu and Japanese conglomerate Sony . He said Baidu is “so darn cheap” and will benefit from China’s reopening and the artificial intelligence trend. “They … already had strong physical search capabilities, the cloud artificial intelligence business, the autonomous driving standard for China, all sorts of research and development that is finally monetizing, and a percentage of the revenues outside of digital search is expanding,” Lynch said. “So for all those reasons, it’s got some growth metrics.” Sony is another stock he also said “trades very cheaply.” Lynch said it’s a good sign that Microsoft offered Sony a 10-year contract to make each new release of Call of Duty available on Sony’s PlayStation console at the same time as the U.S. giant’s Xbox. “I think investors are really ignoring the tremendous business that’s grown in the last several years on their music publishing assets … They’re making tremendous progress on that,” he said. Finally, Lynch named American drug distributor McKesson as his third stock pick, saying it’s in the “top one percentile earnings predictability in a recession.”
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