Do you remember when the tech boom was over? When would-be pundits were coming out of the woodwork proclaiming that the share price gains investors enjoyed during the tech-led share market recovery had run their course?
Those pundits are still out there. But they've gone suspiciously quiet.
To be fair, technology shares did, by and large, race ahead of the pack following the pandemic fuelled market rout. And fears that valuations were stretched did see tech share prices retrace.
In Australia, the S&P/ASX All Technology Index (ASX: XTX) — which tracks 50 of Australia's leading and emerging technology shares — peaked on 25 August. At that point it was up 116% from the 23 March low. Then the index slid 11% through to 14 September. And the tech bears predicted more pain to come.
But, as you probably know, that didn't happen.
Since 14 September, the All Tech Index is up 17% (at the time of writing). It hit new, all-time highs last Thursday 8 October. And it's kept gaining since then, currently up 5% from its 25 August peak and an eye-popping 127% from the 23 March low.
Investors piling into cashed up tech shares
It's the same story across most of the globe, just on a slightly different timeline.
In the United States, the NASDAQ-100 (NASDAQ: NDX) didn't peak until 2 September, up 77% from 23 March. By 23 September, it was down 13% from that peak, putting the index well into technical correction territory. And again, the tech bears forecast more share price losses to come.
But, following yesterday's (overnight Aussie time) 3% gain, the Nasdaq 100 has instead climbed 12% since 23 September. That puts it only 3% below its 2 September all-time highs.
And that high looks like it won't hold the record for long.
Deutsche Bank AG (NYSE: DB), among others, is upping its bullish outlook for some of the biggest technology shares. With an eye on the growth potential in digital advertising, the bank upgraded its outlook for Twitter Inc (NYSE: TWTR), Facebook, Inc. (NASDAQ: FB) and Google's parent company, Alphabet Inc Class A (NASDAQ: GOOGL).
Keith Gangl, a portfolio manager of Gradient Investments noted that (quoted by Bloomberg), "People are going back to the trade that's worked, and that's the growth trade. People are worried about missing out, so they are going right to the tech leaders."
Now there are all kinds of great technology shares on the All Ordinaries Index (ASX: XAO). But if you want exposure to the top US tech shares, you may want to consider the Betashares Nasdaq 100 ETF (ASX: NDQ).
The exchange-traded fund (ETF) is meant to mirror the returns of the Nasdaq 100. And it comes pretty close. The ETF is up 31% so far in 2020, compared to a 36% gain for the Nasdaq 100.
PC demand is booming
Sticking with technology, personal computer (PC) shipments increased 3.6% in the third quarter of 2020, reaching 71.4 million units. That's according to preliminary results by research and advisory company Gartner Inc (NYSE: IT).
According to Mikako Kitagawa, research director at Gartner:
This quarter had the strongest consumer PC demand that Gartner has seen in five years. The market is no longer being measured in the number of PCs per household; rather, the dynamics have shifted to account for one PC per person…
Mobile PC demand in the U.S. market surged as the shift from desktop to mobile PCs became a common practice across public and private businesses, even with many companies partially bringing their workers back to the office. PC demands in the U.S. were also backed by the gradual economic recovery throughout the quarter, including a rebound in employment and an improved consumer confidence index.
Gartner does not include Chromebook shipments in its traditional PC market results. (Chromebooks run on Google's Chrome operating system and are generally less expensive than most traditional PCs.)
If you include the 90% surge in Chromebook shipments in the third quarter, Gartner indicated the total worldwide PC market grew 9% year on year. Which hardly sounds like the end to the tech share boom.
The government's recovery budget and ASX tech shares
We'll wrap this up today with a look at how the government's proposed instant asset write-off measures could impact ASX technology share prices.
For that, we turn to Fiona Hindmarsh, chief executive of venture capital firm Significant Capital Ventures. According to the Australian Financial Review, Hindmarsh believes the budget will increase the demand for high-tech equipment. She says:
This budget is a powerful confidence boost. The tax write-off won't directly impact the start-ups that are sourced and funded by Significant as they are typically not yet profitable. It will however have a dramatic impact on the speed and scale of adoption of these technologies through industry engagement and investment…
Owners of heavy equipment are all seeking technology that will enable them to make autonomy in the field of construction, mining, remote environments a reality. The cost of taking on and accelerating this type of radical technology innovation is reduced with the tax benefits enabling more effective industry partnerships.
All of this doesn't mean that tech share prices won't fall again on any given day or week. But the growth outlook for well-placed technology shares remains robust.
