FAANG stocks could soar 50% this year thanks to long-term demand for tech goods and no new competition, Fundstrat's Tom Lee says

Fundstrat's Tom Lee.

Photo by Cindy Ord/Getty Images for Yahoo

• FAANG stocks have room to advance further, likely rising as much as 50% this year, according to Fundstrat's Tom Lee. 
• "You can't really say that you're going to have diminished demand for these products," he told CNBC.
• Big Tech stocks such as Meta and Alphabet have enjoyed a scorching rally in 2023 following last year's selloff. 

US mega-cap tech stocks have enjoyed a stellar rally so far in 2023, and there may be no stopping them.

According to Fundstrat's Tom Lee, the so-called FAANG group of Big Tech shares could surge as much as 50% this year.

"Our base case for FAANG this year was that it could rise as much as 50%," Lee told CNBC on Wednesday, referring to the five largest US tech companies including Facebook (now Meta Platforms), Amazon, Apple, Netflix and Google. Collectively, the shares have gained about 36% so far in 2023, after a 43% plunge last year.

Lee said he expected a rebound in FAANG stocks after a punishing 2022, when tech and other growth stocks were sold off as the Federal Reserve raised interest rates sharply. He added that the bullish case for tech stocks, including non-FAANG companies, is stronger than he had previously expected. 

"As this year unfolded, it really looks like FAANG - and I'm being a little broader, including things like Nvidia and semis - are so relevant to how you deal with inflation, whether it's through AI or automation. So these are incredibly important companies," he said. 

Mega-cap stocks like Meta and Alphabet and Amazon have jumped 90%, 25% and 30%, respectively, so far this year. The gains were fueled by the companies' strong first-quarter earnings that beat Wall Street estimates even as US GDP growth slowed.

"You can't really say that you're going to have diminished demand for these products. It's actually going to grow, and there's not new competition," Lee said. "So actually that their ability to make future profits is higher, and that's why I think their PE could expand. And again, that really pulls up the whole market," he continued. 

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