There’s no looking back for the technology sector, as its players continue to thrive on the growing popularity of cloud-based platforms, AI solutions, AR/VR reality devices, autonomous cars and Internet of Things (IoT).
The year is coming to an end with a remarkable stock market run. The NASDAQ Composite (IXIC), the S&P 500 (GSPC) and the Dow Jones Industrial Average (DJI) have rallied 24.9%, 18.5%, and 23.2%, respectively, so far in 2017 (till Dec 14).
Among the various sectors, technology continues to shine, with the Technology Select Sector SPDR ETF (XLK) returning 32.5% year to date.
Substantial growth in cloud computing and Internet of Things, artificial intelligence, gaming, and launch of increasingly complex smartphones and consumer electronics suggest that the good times for tech is not to end anytime soon.
What is Driving Technology Sector?
Factors fueling the technology sector are the emergence of cutting-edge technology such as cloud computing, big data, growing adoption of artificial intelligence (AI) solutions, Internet of Things, wearables, VR headsets, drones and virtual reality devices.
High demand for power-efficient as well as high-performance chips — essential for running cloud-data centers and processing massive data by using Big Data analytics — machine learning and deep-learning tools has been a key driver of technology stocks.
Moreover, escalating demand for sensors and software for autonomous vehicles, advanced driver assisted systems (ADAS), Augmented/Virtual reality devices (AR/VR) and Internet of Things (IoT) are noticeable catalysts to growth.
The lighting pace at which the 5G platform and technology are evolving is also worthy of mention. Additionally, growing incidents of cyber attack is anticipated to drive demand for cybersecurity software.
Momentum Likely to Continue
With the global economy gathering strong momentum, technology stocks will continue to outperform and are less susceptible to interest rates or deregulation. The twin tailwinds of President Donald Trump’s tax reform plan and a rising interest rate scenario are driving the stocks higher. This is because the tech titans hoard huge cash overseas and are poised to benefit the most from Trump’s proposed tax reform policy. In fact, the top five U.S. hoarders are Apple, Microsoft, Alphabet, Cisco and Oracle that hold 88% of their money overseas, according to Moody’s.
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