IT sector soars - June 04, 2017

IT sector soars

Billions are flowing into tech companies and this alone makes US stock markets fly lately. It’s no wonder: the greatest returns are expected in this sector. Some tech companies make fantastic returns on the long run, so it’s good to keep an open eye on them.

Investors poured $1.8 billion in a single day “into the largest exchange-traded fund tracking the [tech] sector”, writes Business Insider based on data from Bank of America Merrill Lynch. Thisamount of money flowing into the sector hasn’t been seen for 15 years and that was just before the dot-com bubble.

IT is doing better than many believed it would under the presidency of Donald Trump. He spoke against tech giants several times, but what we can see on the market, contradicts the expectations: since presidential election, Tech companies surged by 21%.

This speed is quite understandable when we see graphs like the one made of Amazon’s growth. Since its IPO, Amazon gained 50,000%, meaning that if someone invested a thousand dollars in it, now would have $491,000.

But this kind of growth can be seen in other giants like Google and Facebook. Google surged from $64 to $975 per share, making it a worthy investment and sticking to their stocks for long years. Just like Facebook, which elevated from $31 to $152 in 5 years. And these giants are constantly growing now, making them much less risky than start-ups.

Therefore, these companies are rather important for investors, as they can constantly generate profit and returns. But how do they earn so much money? That depends on their exact profile. Business Insider created a chart to explain how the biggest tech companies make revenue.

This shows that companies like Facebook, and Google owner Alphabet are based on Ad revenues. Apple is mostly about iPhones while Amazon generates money with selling products. Microsoft, on the other hand, is much more diversified in this matter.

The surge of tech giants alone makes American stock markets (mostly Nasdaq) fly. The growth we can see now is becoming exponential, but these jumps may be followed by a bigger correction. As long as optimism lasts, prices may go higher, but the market can be considered volatile, so caution when investing in the sector is advised.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.