After tech stocks fell 30% last year, with some Big Tech firms faring even worse, 2023 has been a year of recovery in the sector. Alphabet shares have surged nearly 18%, Microsoft has gained more than 15%, and Amazon and Meta are up 21% and 67%, respectively.

The strong performance comes after more than a year of aggressive Federal Reserve interest rate hikes that tend to weigh on stocks, along with repeated recession warnings from Wall Street. But despite the challenges, the U.S. economy and stock market have remained resilient. The S&P 500 is up 7% year to date, unemployment remained near a record low at 3.5% last month, and the Atlanta Fed is forecasting 2.5% GDP growth in the first quarter.

“There is an increasing sense that corporate America can cope with higher interest rates more successfully than expected, and that is attracting more buyers of stocks,” George Ball, chairman of Sanders Morris Harris, a Houston-based investment firm that manages $4.9 billion for clients, told Fortune Tuesday.

Ball believes that the U.S. economy’s recent strength in the face of stubborn inflation and rising rates could help the market continue its rebound this year, but Big Tech’s rally is a different story—that has “run its course.”

“We expect the broader markets to move back near record highs at some point in 2023, but it won’t likely be because of Big Tech,” he said. “We instead believe smaller technology stocks will likely lead the market.”

To rebound to near their all-time highs, stocks would have to make big gains. The Dow Jones industrial average is still about 9% from its January 2022 peak of 36,799, and the S&P 500 is roughly 17% off its late 2021 record high of 4,783.

Big Tech or Little Tech

The key to Ball’s theory—that smaller tech stocks will outperform their megacap rivals this year—lies in revenue growth. He argues that owing to the sheer size of Big Tech companies, it will be “almost impossible” for them to continue growing their revenues at the same pace they have over the past decade. 

“Hence upside potential after the partial recovery is medium grade at best. Smaller but established tech companies are where the almost unbounded growth opportunities exist,” he said.

Ball argued there is value in smaller tech stocks that have dropped 50% to 80% since the market’s peak in late 2021. He pointed to the Argentine e-commerce company MercadoLibre and the virtual health care company Teladoc, in particular, arguing that “each has a strong cash position” and “opportunity for margin improvement.”

The veteran investor added that even if smaller tech stocks outperform, he doesn’t believe 2023 will be a record year for stock market performance, but that doesn’t mean investors should hide in cash.

“Stay invested, but be sure to avoid speculative excess. This will be a year of three yards and a cloud of dust, not 60-yard touchdown passes,” he said, referencing a hard fought football game. “The tortoise will beat the hare, once again.”

Others are still cautious

While Ball and other bullish analysts believe stocks will continue to rise in 2023 as the economy strengthens, not everyone on Wall Street has the same confidence. Chris Haverland, global equity strategist at Wells Fargo Investment Institute, explained in a Tuesday note that he foresees a recession later this year that will “weigh on corporate earnings and cap near-term upside to equity prices.”

“While some are calling this a new bull market, we would caution investors that bear markets have rarely ended prior to economic recessions or while the Fed is still tightening monetary policy,” he wrote.

Using history as a guide, Haverland claimed that the bear market won’t end until the recession is in full swing and the Fed turns dovish. “When things fall apart, equity markets often do not bottom until after the first [interest] rate cut,” he noted. “Until then we suggest maintaining a defensive stance in portfolios.”