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Technology stocks are the hottest thing amongst stock market investors right now – with major tech companies having a great 2015 and increasing their value significantly.
The great tech year is mostly reflected on the stock indexes perform – the NASDAQ Composite Index has gained the most out of the big three, about 6.6 per cent, as it mostly includes big tech companies. But this also reflects on other – tech companies now make up 20 per cent of the Standard & Poor’s 500’s value, which represents the best they have done since before the 2000’s dotcom bubble.
The success tech companies have experienced is great when put against the backdrop of a slowly progressing economy in most other aspects. But the online is an ever growing domain – as the internet establishes itself as the king of communications, more and more parts of our daily life are becoming implemented online, and so the industry has a greater growth potential than virtually any other.
Two examples here are e-commerce and social media. E-commerce has been steadily creeping its way to overcome all other methods of distribution due to its insane accessibility – just look at the growth of major online retailers such as Amazon or E-bay. Social media has even surpassed that as it became the prime means of expressing ideas, opinions or just keeping in touch with people you normally couldn’t – interconnecting the world and fueling other industries just through that. And both still have a lot of untapped potential in them.
But another selling point is the fact that tech services are becoming more and more affordable through alternate business plans, such as subscription models or even free services sustained by ad revenue. This also reflects in stock prices, as tech stocks are trading at lower rates than other industries – and the combination of cheap, practical and bristling with potential attracts investors like fleas.
It’s also hard to argue in favor of another dotcom burst similar to 2000. Being that tech companies aren’t actually over evaluated for what they offer, and they mostly trek businesses which have been proven to attract customer interest, the industry’s future seems safe from over-appreciation. In comparison, late 90’s tech companies were mostly treading a fledgling industry while being evaluating mostly on the huge potential it had and not for the services they were actually providing, leading to the dotcom crash of 2000.
Image Source: TIME
