IT Stocks Boom As Wall St Embraces Technology Giants
Wall Street investors are enthusiastically banking on another boom in the technology industry, but this time pundits say it’s not going to develop into a speculation bubble.
Last week’s higher-than-expected earnings from the top US tech companies are driving the stockmarket back into the black and giving investors hope that the global economy will grow – just not in the way they expected.
With Apple expected to report top level earnings later this week, investors are looking at the prospect of a record trading day on the Nasdaq 100. Apple is expected to report US$51.1 billion in revenue, a 21.3 percent increase compared to last year, with shares in the iPhone maker tipped to rise by as much as five percent by the end of the week.
Investors meanwhile are genuflecting to other tech giants Alphabet (read Google), Amazon and Microsoft, after they led a US stocks recovery out of the worst correction in four years.
The S&P 500 Index and the Nasdaq 100 both ended the week on a high and the scramble for tech stocks is expected to continue when Wall Street opens tonight (Monday, AEST). The Nasdaq is just 4 percent from its record high, recorded back in the heady tech-boom days of 2000.
According to the Wall Street Journal, half of the 10 most-valuable US public companies are now technology outfits, led by Apple, Alphabet and Microsoft – and, with the reporting season trumpeting upbeat earnings in the sector, big investors want to be part of the action.
Last week alone Microsoft stocks rose 10 percent, their largest gain since October 2000, Alphabet (n?e Google), gained 7.7pc and Amazon.com added 6.2pc.
The companies all posted earnings above expectations as the companies move into cloud services, grow datacentres and customers move operations online.
Amazon Web Services’s cloud-computing business has grown 78 percent annually, while Microsoft’s competing Azure service grew more than 100 percent year-on-year, generating nearly US$5.9 billion in revenue.
It’s not such good news for tech start-ups, however, with investment firms downgrading their valuations. Of 49 US start-ups with IPOs in 2014, 11 are now trading below their per-share value.
But another positive move has been consolidation in the chip industry, with last week’s US$19 billion takeover bid from Western Digital for SanDisk pushing its stock up 70 percent. – Chris Castellari