This one applies more to startup investing, whose shiny new gadgets might be too ahead of their time or worse-not even needed by customers. Hard to maintain competitive advantagesĪs quickly as new tech giants rise, old tech giants fall, a la BlackBerry, Kodak, and Yahoo. And if that’s the case, why should you expect the price to go up? And “because Wallstreetbets said so” is not an answer.
Laymen aren’t always able to pinpoint the value of these products or services. Aside from stock market bubbles like the dot-com crash, tech stocks are risky for the following reasons. This shows how quickly many tech companies have skyrocketed in value.īeware: Tech’s high growth potential doesn’t come without a price. Some of the world's largest tech stocks aren’t even 2 decades old. Google, for example, owns 92% of the search engine market. Unlike most industries where companies have to fight for a tiny slice of the pie, tech companies are able to build monopolies in their markets. Overall, though, earnings growth on a balance sheet is the best indicator of whether or not technology companies are making more money.
Tech stock bubble software#
This applies more to the software tech sector because companies can scale their product to billions of users in the cloud without any manufacturing costs. Over the past decade, the NASDAQ-100's exposure to the tech sector has helped it outperform the S&P 500 by 2.5x. More than half of the NASDAQ-100's market capitalization comprises technology stocks, while tech companies are less than a quarter of the S&P 500. And if you still need more convincing, tech stocks tend to offer the following perks. The hottest sectors found among these categories include 3D printing, artificial intelligence (AI), blockchain, virtual reality (VR), and cloud computing.Įight out of the ten most valuable stocks in the world right now are tech companies. Information: Companies that provide access to content, marketplaces, and social networks over the internet, such as Yahoo, Alibaba, and LinkedIn.Įach category can cover more than one tech sector, and some technology stocks have integrated across multiple categories in the past few years.Telecommunications: The technology sector making things we use to communicate over great distances, like satellites, telephones, television, and the internet.
Tech stock bubble license#
You used to have to buy a license for each piece of software, but nowadays many companies offer subscriptions or Software as a Service (SaaS). Software: Programs that let us do useful or fun stuff with our devices, like Excel, Chrome, and Angry Birds.Hardware: A catch-all term for physical devices and machines, like light bulbs, airplanes, computers, and so on.For the sake of brevity, we can group the best tech stocks into four foundational categories: Tech stocks are simply shares in companies that sell technology, covering a wide range of businesses:Īnd the list goes on.
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