According tomedia reports, since the recovery of the financial crisis, in 2019, the end of the performance of technology stocks should be the best year. As December draws to a close, the 70-member Standard and Poor’s 500-member Information Technology Index (IT) is up 48 per cent in 2019, its best year since it jumped 60 per cent in 2009.
The difference a decade ago was that the tech index was falling back from 2008, when it plunged 44 per cent, creating buying opportunities and paving the way for the so-called “dead cat rally”.
This time, technology stocks fell just 1.6 percent in 2018 and rebounded to new highs in 2019, suggesting that the latest rally was supported by a strengthening of corporate finances and optimism about the broader economy.
This year, it is led by a group of semiconductor manufacturers and chip equipment companies, as well as Apple.
It should be noted that this index does not include Internet companies. As a result, FANG (Facebook, Amazon, Netflix and Google) stocks are not in the index. Even so, of the four stocks, only Facebook outperformed the Standard and Poor’s 500 INDEX, while each of the others fell at least 18 percentage points behind.
Jack Dollaride, chief executive of Longbow Asset Management, an asset manager, said: “THE FANG’s trading situation has not been good this year, while other technology companies are catching up. Much of this is due to a growing consumer appetite for mobile technology. “
By Thursday’s close, chipmaker AMD was the biggest gainer in the Standard and Poor’s 500 IT index, soaring 153 percent. This was closely followed by semiconductor equipment maker LAM Research, up 117 per cent. KLA, which also supplies the chip industry, rose 100 percent, while Qorvo, the iPhone’s RF technology supplier, rose 94 percent.
Apple also performed strongly, ranking eighth in the Standard and Poor’s 500 IT index, up 84 percent. Given its size, the iPhone maker has so far been the biggest contributor to the index’s rise.
While the smartphone market is becoming increasingly saturated and there have been concerns that the iPhone won’t get better or stronger, Apple continues to appeal to consumers with new features and options. Apple is reported to be launching more iPhone models next year, some with larger screens and smaller screens.
Apple’s iPhone sales are expected to fall 9 percent in October, suggesting an improvement from previous quarters. Separately, CEO Tim Cook is optimistic about the performance during this year’s Christmas shopping season.
In addition to supporting the iPhone with advanced camera technology, longer battery life and upgraded speakers, Apple has created another fast-growing business: The wearables division’s sales in the most recent quarter were up 50 percent from a year earlier, thanks to the popularity of the Apple Watch and AirPods. %。
There is no doubt that all this is good for Apple suppliers such as Qorvo and AMD. About a third of Qorvo’s revenue depends on Apple, while chipmaker AMD provides graphics processors for some Apple iMacs and MacBook Pros. In addition, Skyworks shares have risen 82 per cent this year, ranking ninth in the Standard and Poor’s 500 IT index, with half of its revenue coming from selling mobile chips to Apple and its various contract manufacturers.
Micron, which supplies Apple’s memory technology, rose 14th in the index, up 74 percent.
“It’s an apple world and we’re lucky to live in it,” Says Rashid. “
In the chip device market, LAM and KLA are benefiting from trends, including from Apple, but also extending to the broader explosion of mobile devices. As the world prepares for 5G high-speed networks, manufacturers are developing more connected devices, meaning more microprocessors are needed.
To meet this demand, big chipmakers such as Intel, Samsung and TSMC are increasing their spending on equipment from top suppliers.
In 2015, LAM and KLA agreed to merge for $10.6 billion, but the plan was canceled because of antitrust concerns. Now, LAM is on the verge of its best year since 2003, and KLA is enjoying its biggest annual gain since 1999.
“As computing applications outstrip PCs, phones and tablets, we may enter a period of 10 years or more of semiconductor expansion,” KeyBanc Capital Markets analyst Weston Twigg said in a report on LAM last month. To that end, Tweig recommends buying LAM shares. “5G will bring in more connected devices,” he said. “
In addition to consumer electronics, the Standard and Poor’s 500 IT index also benefits from ongoing cloud computing trends.
Microsoft’s shares have climbed 56 percent this year, boosted by growth in Azure Cloud Infrastructure and Office 365 applications, pushing the company’s market value to $1.2 trillion, second only to Apple’s $1.29 trillion in U.S. companies.
In addition, Adobe and Autodesk, both companies that have moved from traditional suite software to the cloud in recent years, have both gained more than 43 per cent, compared with a 61 per cent rise in ServiceNow, a cloud IT service provider that joined the index last month.
There are ups and downs. DXC Technology was the biggest faller on the index, underscoring how difficult it is for some companies to adapt to the wave of cloud computing. The company was founded two years ago by HP’s Enterprise Services and Computer Science Corp. Combined, it has fallen 30 per cent this year, following a 30 per cent plunge in a single day in August. In its quarterly earnings report, DXC provided disappointing revenue and profit forecasts, reflecting a deterioration in the company’s outsourcing business.
But in any case, only seven of the index’s 70 members are likely to run deficits this year. By 2020, there will be growing pressure on them to hand in a satisfactory report, especially for the fastest-growing companies.
The market-to-sales ratio for the Standard and Poor’s 500-stock index is 5, the highest since 2000, according to FactSet, a financial data provider. Apple’s current price-to-earnings ratio is at an all-time high, while Microsoft’s share price is relatively high relative to the average of the past few years.
Given some of the uncertainty surrounding global trade, the global economy and the November election, it remains to be seen whether the sector’s current upward momentum will withstand all macro headwinds next year. (Li Ming)