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Times were so bad for tech in late 2022 and early 2023 that even the perma-tech-bull Cathie Wood started selling shares of chip-king Nvidia (NVDA/NASDAQ) beginning October 2022.
Investors make plans, and the market gods laugh.
So much for the idea that tech was done disrupting, and that it was going to take years before another growth cycle was ready to begin. Tech has been the saving grace for many investors’ portfolios this year.
While the S&P 500 index is up more than 15% so far in 2023, if we were to take out the gains from Apple (APPL/NASDAQ), Microsoft (MSFT/NASDAQ), Alphabet (GOOG/NASDAQ), Amazon (AMZN/NASDAQ), Nvidia, Tesla (TSLA/NASDAQ) and Meta (META/NASDAQ), the other 493 companies are actually down year to date (YTD). (Hence the phrase “The magnificent seven.”)
To put it another way, the tech-tracking ETF QQQ (which follows the 100 largest companies on NASDAQ) is up over about 40% YTD, versus a 3.85% gain for the Dow Jones Industrial Average Index. This is happening against a backdrop of increased debt-servicing costs. Imagine what bottom lines may look like when interest rates begin to come down again.
Most of the USD$4-trillion surge in tech stocks is attributed to advances in artificial intelligence (AI) and the potential for increased productivity. While I’m not prepared to say the rush into tech won’t pull back a bit going forward, I do think there’s enough evidence that AI has more staying power than the vast majority of fraudulent cryptocurrency applications. Moreover, I think the last few months present an excellent example of why having an overall optimism bias is advantageous for investing. While it’s difficult to know where the next advancement in productivity and profitability will come from, betting on expanded efficiency frontiers has always paid off sooner or later.
Canadian investors can also consider the CAD-Hedged iShares NASDAQ 100 Index ETF (XQQ), and can read more about Canadian tech stocks on MillionDollarJourney.ca.
Oracle and cruises making waves
It’s not just the magnificent seven tech stocks that are seeing rocketing profits and investment. Judging by this week’s earnings highlights, most of the sector is going along for the ride. (Numbers in this section are U.S. currency.)
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