Business
Why Big Tech Is Failing the S&P Quality Test
Big AI companies are spending heavily. The result is a bit, though not completely, obvious: They have got less money. Sure, profits mostly look fine, but cash piles are depleting, they are turning to the bond markets to borrow and in some cases the companies are less cash-generative.
For investors who try to buy what they call “quality” companies, this is an issue. Big Tech firms have been the archetype of quality stocks for years: highly profitable, producing buckets of cash and with barely any debt.
The issue is just starting to show up, and has led to a divide between the two biggest quality ETFs, backed by rival indexes from S&P and MSCI that use different selection criteria. The Invesco fund, which uses S&P, has ditched a bunch of Big Tech stocks as they start to miss its quality qualifications, and as a result recently lagged far behind the iShares fund that uses MSCI and still holds names such as Nvidia.
