Technology is taking over the world. You know that. I know that. We all know that. It’s basically a maxim of modern life.
The development and subsequent expansion of the internet has given birth to multiple time-saving, cost-saving, and efficiency-boosting technologies that consumers and businesses alike are adopting en masse.
It’s no wonder that, as technology has taken over the world, tech stocks have been the shining stars on Wall Street. Over the past decade, the tech-heavy Nasdaq-100 has outperformed the old-school Dow Jones Industrial Average by a factor of 5:1.
What Changed for Tech Stocks
But, oddly enough, this decade-long trend of tech stocks crushing it on Wall Street abruptly ended in early 2021. From Dec. 31 to mid-May, the Dow rose more than 10%, while the Nasdaq-100 inched higher by just 1%.
Why?
The reopening. Long story short, the pandemic kept everyone locked inside throughout 2020, so that when all those people were finally allowed to go out and do things in early 2021, they did just that. They went to movie theaters. They shopped at malls. They ate dinner at restaurants. They traveled.
And, in doing all of those “real world” things, they did less “digital world” things, like shopping online, watching streaming TV, playing video games, etc. Wall Street followed the consumers on this trend, and piled into old-school stocks like industrials, energy, and retail names, while ditching technology stocks like e-commerce, telework, and streaming stocks.
This is a temporary phenomenon. And it’s already fading.
Pent-up demand to do “real world” things is getting exhausted. Now, consumers are reverting back to the time-saving, cost-saving, and productivity-boosting technology platforms that make their lives easier.
Instead of fighting their way through crowds at the shopping mall and wasting an hour commuting because they “missed the mall,” consumers are reverting back to shopping online, hassle-free and in an instant.
Instead of rushing back to the office and wasting time in a car because they “missed the office,” consumers are pushing for more telework options so they can spend less time commuting and more time doing whatever it is they love doing.
Instead of flocking to theaters to watch movies with trailers and sit in a room with strangers because they “missed the movies,” consumers are going back to streaming the latest blockbuster movie straight to their smart TVs in their living rooms.
The Strength of Tech Earnings
Where’s my proof? This earnings season!
Shopify (NYSE:SHOP) – a provider of e-commerce solutions – reported blowout earnings last week that included 40% gross merchandise value (GMV) growth.
Twilio (NYSE:TWLO) – a provider of cloud communications tools for a telework environment – also reported blowout earnings last week, headlined by 67% revenue growth.
Netflix (NASDAQ:NFLX) – the streaming TV giant – reported blowout earnings recently, and the company is forecasting new subscriber additions to more than double quarter-over-quarter.
These are not isolated incidents. We are about halfway through earnings season, and of the technology companies that have reported second-quarter numbers, 95% of them have topped revenue estimates while not a single one has missed earnings estimates. Not one…
The average size of the beat on the top line? 3%. The average size of the beat on the bottom line? 13%.
Those are wildly impressive numbers – and they underscore that tech is back.
Old-school stocks had their day in the sun through the first five months of 2020. Now that’s over, and it’s time for tech stocks to reassert their dominance on Wall Street.
The best part? Because tech stocks have underperformed over the past few months, they’re due for a vigorous rebound rally here in the coming months – and that rally will extend into another decade of tech stock dominance as new technologies like artificial intelligence (AI), 5G, and blockchain spread throughout the world and fundamentally change the way we live.
In other words, it’s time to go “all-in” with tech stocks.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.
