There's a rotation within the tech sector as FANG sells off — Here's how to play it

Published Tue, Nov 10 20202:31 PM EST

(This story is for CNBC Pro subscribers only.) The big market rotation into value and out of growth is getting all the attention on Wall Street this week, but there's also a shift within the tech sector that investors can take advantage of, strategists said. While the FAANG block slipped from their early September highs and stay-at-home bets fell out of favor, some names in the information technology group are breaking out to new highs, including chip makers, fintech stocks as well as data service companies. The best performers in the S & P 500 tech sector this week have been smaller players less influenced by the pandemic or a possible vaccine. The strength in these names helped cap losses in the broader technology space as investors dumped high-flying Big Tech and Covid-19 beneficiaries like Zoom Video . FleetCor Technologies , a workforce payments company, has soared more than 20% on the back of its stronger-than-expected quarterly earnings from last Thursday. The rally has pushed the stock above its 200-day moving average, a widely watched momentum indicator. Other big gainers in the fintech space week to date include Global Payments , Fidelity National , Mastercard and Visa , which have all gained at least 7%. Meanwhile, data service company NetApp and IT consulting firm Gartner also jumped this week. "We think some rotation within the tech sector will be a good idea for the rest of this year," said Matt Maley, chief market strategist at Miller Tabak. "This [vaccine] news is going to push a lot more money from the momentum based strategies into these other tech names...than it has over the past two years." A group of semiconductor stocks broke out to new highs in the past week, and they are likely to outperform the FAANG names between now and the end of the year, Maley said. These names are Micron , AMD, Nvidia , Texas Instruments and Taiwan Semiconductor. Some on Wall Street are betting that many chip stocks will be beneficiaries from a 5G rollout across enablers and platform companies. "We see the transition to 5G as an inevitable trend that is becoming increasingly attractive," Solita Marcelli, Head of CIO Americas at UBS, said in a note on Tuesday. "Support for 5G infrastructure comes from both sides of the aisle, and will not likely be impacted by the transition of power at the White House."

WeChat Pay on mobile phone in action.

Zhang Peng | LightRocket |Getty Images

(This story is for CNBC Pro subscribers only.)

The big market rotation into value and out of growth is getting all the attention on Wall Street this week, but there's also a shift within the tech sector that investors can take advantage of, strategists said.

While the FAANG block slipped from their early September highs and stay-at-home bets fell out of favor, some names in the information technology group are breaking out to new highs, including chip makers, fintech stocks as well as data service companies.