Since the beginning of July, the Nasdaq, a technology stock index, has gained 14.8 percent. The growth in the market value of the leading American technology companies - Apple, Microsoft, Alphabet, Amazon and Tesla - by 1.3 trillion dollars contributed the most to this.
Such a strong recovery in the shares of technology companies comes after a strong fall in the first half of the year, and analysts, writes the Financial Times, cannot agree on the meaning of such a strong growth.
Some predict that this is a sign that investors hope that the sector will be able to overcome the global recession, and others that the summer technological growth could be short-lived.
Andrew Lapthorne, quantitative strategist at Société Générale, recalls that temporary monthly spikes of 10-plus percent were a common sight during the Nasdaq "bear market" between 2000 and 2003, and warns that instead, investors should prepare for major declines.
earnings this year and next year. “Earnings reports for the second quarter so far have led to significant downward revisions to earnings forecasts for the Nasdaq 100, including a 5.5 percent cut from the 2022 estimate and a 6.5 percent cut from the 2023 forecast.
to the point that billions will be wiped out of the earnings of American technology companies," Lapthorne points out. On the other hand, Jon Guinness, manager of US fund Fidelity International, worth £776m, expects global technology spending to remain healthy, even if companies delay or cancel some projects this year.
"A fifth of the new cars produced in Europe are now electric vehicles that have computers on wheels. Cloud computing is a real substance development that is being adopted by many companies. The tectonic shifts driving technology adoption are still present," Guinness opined.
Ben Rogoff, head of the technology team at Polar Capital, an asset management company, agrees, and expects global IT spending to grow between two and four percent this year. However, it warns that profit margins could come under pressure due to inflationary pressures, rising wage costs, supply chain challenges and the strength of the US dollar.
"Spending on technology remains an absolute imperative for businesses globally," said Rogoff. The S&P sectoral index of technology stocks traded at a price-to-earnings ratio of 28 in early January, but the valuation fell to 19.2 in late June, according to data from Refinitiv.
Even with current gains it is trading at 21.2 annual earnings. Jonathan Curtis, manager of the technology fund Franklin Templeton, points out that the technology sector is still trading at a premium compared to the American money market.
"The current valuation premium for the technology sector is not excessive. It reflects the growth of the sector's profit margins over the past 12 years and the constant growth of revenues," he says.