The Next $1.8 Trillion Tech Bull Run Is Starting Now – Here’s What to Do
During the low interest-rate, cheap-money 2010s…tech stocks led the markets by a mile. Between March 2009 and December 2021, the bellwether Technology Select Sector SPDR Fund (XLK) packed on more than 1,142% in gains against the 580%-plus run of the SPDR Select S&P 500 ETF (SPY).
It wasn’t until the U.S. Federal Reserve began raising interest rates above near-zero that the unprecedented tech bull run came to a screeching halt.
2022 was a rough year for Silicon Valley, to put it mildly. Inflation, interest rates, regulation, and competition delivered blow after blow, culminating in 150,000 layoffs across the sector.
And in 2022, for the first time in the careers of most Wall Street experts, the most popular tech stocks actually underperformed the broader market with the tech-centric NASDAQ Composite down 30% at the end of last year.
As for 2023, it’s been a different story—and with immense opportunity…
Tech stocks are once again leading the market this year, and prices will continue to rise. Here’s why:
Great technology companies are doing what great tech companies do: they’ve adapted to a changing environment, successfully leveraging their unique competitive advantages.
Investors have changed the way they look at tech stocks and judge the path to profitability, but the tech itself remains the no. 1 destination for investors looking to cash in on the sheer pace of innovation in artificial intelligence (AI), genomics, augmented reality, cryptocurrency and the blockchain, and more.
Don’t let 2022 fool you. Here are three reasons why your portfolio needs tech stocks:
1—Accurate Valuations
At long last, tech stocks have reasonable, even attractive valuations – that hasn’t been the case in more than 10 years. After the 2022 correction, multiples look good, and cash flow and growth potential look strong.
Take ON Semiconductor Corp. (ON), a leading designer of automotive, 5G, medical, defense, and industrial semiconductor solutions. Even with ON shares trading close to all-time highs, its P/E ratio has come down more than 75%, while free cash flow per share and revenue growth is well above the stock’s five-year average.
Crowdstrike Holdings Inc (CRWD), a leading cybersecurity company, is another great example. CRWD shares are currently trading roughly 50% below highs. The company has been growing its free cash flow per share almost every quarter since it went public in 2019. Its growth rate has come down a bit from its peak, but it’s still growing at more than 60% year over year. That’s faster than 80% of the stocks in the S&P 500.
2—Competitive Moats
Many tech companies have built strong barriers to entry that help protect market share and profitability.
Alphabet Inc. (GOOGL), for example, has a dominant position in online search and advertising, with a global market share of over 90%. They own hugely valuable assets like YouTube, Google Cloud, Google Maps, and Google Play.
More than 45% of the world’s smartphones run its Android operating system. This immeasurably powerful “network effect” makes it virtually impossible for competitors to attack its leadership.
Intuit Inc. (INTU) has a dominant position in the $14 billion electronic tax preparation and accounting segment. Intuit boasts more than 50 million customers – and many of them are fiercely loyal, returning again and again to service their financial needs. That massive, loyal customer base is a formidable moat.
3—Outperformance
Competitive moats are a crucial element of any business strategy. It’s a simple but extremely compelling reason to own tech again: the stock market is there to make money.
Since the early 1980s when the pace of innovation began to accelerate, the NASDAQ Composite has beaten the other major U.S. indexes like the Dow Jones Industrials (many of which are tech or tech-adjacent) and the S&P 500 by more than 1,000%.
And now that the correction is over, we have every reason to expect extreme performance to continue through 2023 and beyond – regardless of what happens to interest rates in D.C.
So, get ready…
Because from now on, every week, the American Institute for Crypto Investors team will be assessing the top tech investing opportunities the market has to offer, including:
- Artificial intelligence (AI)
- Quantum computing
- Automation and robotics
- Virtual and augmented reality (VR and AR)
- Renewable energy
- And more.
AI alone is expected to add some $15.7 trillion to the global economy by 2032, and that’s just one tech niche—there will be countless trillions more for the taking.
We’ll keep tabs on what’s happening at Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT), of course, but those companies’ biggest gains are behind them.
But the actual high-growth opportunities lie in the less well-known corners of the tech sector where hungry, ambitious, and smart CEOs are driving innovation at a relentless pace.
Together, we’ll build a tech “moonshot watchlist” of stocks with profit potential that Silicon Valley’s sharpest venture capitalists would die for.
We’ll return next Monday with the next round of tech investing opportunities for profit-hungry investors.
Talk soon,
AICI Editorial Team