While 2023 isn't over just yet, we can still conclude it has been a fantastic year for ASX tech shares, at least so far. The S&P/ASX 200 Index (ASX: XJO) has had an exceptionally bumpy year, only recording a gain of 1.55% year to date (at the time of writing). But it's a very different story for the S&P/ASX 200 Information Technology Index (ASX: XIJ).
Over 2023 to date, the Information Technology index has gained a whopping 23.6%. So barring a calamitous next six weeks, it looks as though ASX tech shares are on track for a stonking gain.
However, keep in mind this performance comes off the back of what was an awful year for ASX tech shares back in 2022. During the previous calendar year, this same technology index tanked by more than 34%. And it's still close to 30% down from the all-time highs that we saw back in late 2021, even after the considerable momentum we've seen over 2023.
So, with all this in mind, ASX tech investors might be wondering what 2024 might hold in store. Will it be a year of 20-something per cent gains, a la 2023, or 30-something per cent losses, a la 2022? Or perhaps something in between?
Well, I hate to be the bearer of obvious news, but I have no idea. And nor does anyone else. It's difficult enough to make predictions about the future of one company, let alone an entire sector.
However, we can make a few observations.
Where are ASX tech shares heading in 2024?
Part of the reason ASX tech shares have had such a strong rebound over this year so far is that many prominent ASX tech shares have continued to show impressive growth rates.
Just take Block Inc (ASX: SQ2). Earlier this month, the US-based fintech share and Afterpay owner reported a 24% rise in quarterly revenues for the three months ending 30 September to US$5.62 billion. That was alongside a 21% rise in gross profits to US$1.9 billion.
While Block's shares have struggled more than most in 2023, this kind of growth can feed into the momentum of other ASX tech shares and boost sentiment.
Likewise, fellow tech stock Xero Limited (ASX: XRO) has also reported some impressive metrics this November. For the half-year ending 30 September, the cloud-based accounting software provider revealed a 21% year-on-year rise in revenues to $800 million, as well as a massive boost in net profits to $54 million.
WiseTech Global Ltd (ASX: WTC) was another ASX 200 tech share with a lot to show for itself this year. In August, the logistics solutions company showed off a 29% boost in revenues for its full 2023 financial year to $817 million, in conjunction with a 30% rise in underlying profits after tax to $248 million.
All of these reports have probably helped the tech sector post the impressive rise it has seen for 2023 so far.
For tech shares to have another top year next year, most of the biggest players will probably need to come up with some equally impressive numbers. Remember, tech shares tend to trade on some of the most expensive earnings multiples in the market.
This is because investors often bake a lot of growth into these companies' share prices. So the actual revenues and profits that the likes of Xero, Wisetech, and Block report are likely to largely determine whether 2024 will be a 2022 or a 2023, or something in between.