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The Super Bullish Case For Tech Stocks (Long Term)

This won’t be a long post, I’m mainly here to stoke discussion and educated opinions.

The nature of technology is that of exponential progress. If you were to review the latest greatest tech of each era, it would be plainly obvious just how fast things evolve. TV to VCR to Walkman to Playstation to VR. The next new tech of today often makes the last thing look ridiculous. Even if you were to look year to year, you would witness growth that reaches far beyond any other sector. I’m going to make a few quick cases for technology being the highest value, highest growth, and simply the best investment of the next decades and beyond.

1. **It is being subsumed by everything.**

Technology is no longer a separate entity. Recently Bank of America claimed they are really a tech company. That’s kind of a stretch, but the point is taken. Everyone has incorporated tech into their business model. Tech is what makes things cheaper, easier, more efficient, cleaner. And any company with intention of surviving is rapidly adopting technology into their models.

2) **It was fairly stagnant for a very long stretch.**

If you look at QTEC or any of the other technology ETF’s you’ll see a ten year period from 2006 to 2016 where the value of tech more or less doubled. Doubling your money in ten years is nothing to sneeze at. However, if you look over the next 5 years, from 2016 to 2021, tech more than tripled from there. There are many who might claim that makes tech overvalued, but I look at it as more as coming into a ‘catching up’ phase. Tech brought a lot of prosperity to the world from 1970’s to today. That was not properly reflected in share prices until recently. I think you could make a case that, especially when considering point 1 above, tech is still vastly undervalued. If tech was to disappear, it would not only be companies like Apple, Microsoft, Palantir, etc that would fall, but the value of every company on earth would fall as well. Ask yourself: How much prosperity on the S&P over the past couple decades can be directly attributed to tech?

3) **The future depends on technology.**

If you were to ask someone what are the most sensitive issues going forward, you might hear things such as energy concerns, climate change, security, food shortage, water shortage, pollution. You’d hear a lot more answers as well. How will they be solved? To make an argument outside of technological disruption would be laughed at, and for good reason. We’ve hit an inflection point where all the problems we’ve gotten ourselves into can be solved only by technology. Will it happen? There are concerns around the viability of technology to solve our issues at the speed necessary. But what is the alternative?

**Conclusion**

Technology will almost certainly experience a pullback at some point over the next few years. It could be now, next month, next year: no one knows that. But what is almost certain is that for a young investor, technology is very likely to be the best investment you could make. Fintech, genomics, AI, VR, AR, cybersecurity, agriculture, EV tech, this list goes on. What are the chances these things do not play a gigantic role in our futures?

All opinions are welcome. I’d encourage people to stick to mature discourse since this thread is kind of lacking it at times. I’m really curious to hear any supporting or differentiating opinions. Thanks!

What do you think?

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13 Comments

  1. As you say though the next tech renders the old obsolete. It’s hard to go long on tech companies because outside of breakout successes like Apple and Microsoft, they fall out of favour so rapidly.

    Remember when Skype was a major deal just a couple years ago? Now there’s FaceTime, Teams, Zoom etc. And no one mentions Skype anymore.

    Tech is the future but typically a rotating cohort of companies. I don’t like the sector for the types of plays I make. You want a stock that’s going to be the future and not just the immediate future.

  2. Checkout all of Microsoft’s announcements and changes this week from that developer conference. It’s crazy. Microsoft is going to dominate the future.

    They do already

  3. As a consultant senior software architect, I’ve worked with a lot of tech companies of different sizes.

    There are many tech companies that seem promising, but poor management prevents them from achieving the success they should and in many cases is the cause of failure. I can only recommend you do your research thoroughly, look into each company’s release cadence, and how many of their releases are adding new significant features vs just fixing bugs.

    A well-managed tech company should still be regularly releasing significant updates even after a few years of operation and pure bug fix releases should be occasional rather than the rule.

  4. Exactly. Also, we can’t think of “tech” as just one industry whose fates are all aligned. There are so many new and distinct industries that just happen to leverage the power of advanced software/hardware.

    Just off the top of my head: Cybersecurity, Streaming, Gaming, Fintech, Enterprise Software, Internet Infrastructure, Consumer Products, Cloud, Data, and a whole bunch of Software Utilities like AutoCAD or Adobe Creative Cloud.

    Some are booming, some are saturated.

  5. Exponential growth also means exponential decline. New companies taking over quicker and quicker. Because they also grow exponentially, they can fight the big guys. Also, in the end, they won’t be making more money than can be supported by the middle class.

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