Market analysis: Tech stocks set for a hotter streak

Tech stocks such as Apple, Alphabet, Microsoft, Amazon and Facebook, above, are all Nasdaq components and all stocks have risen sharply since the start of the year. Noah Berger / AP Photo

Tech stocks have been on a winning streak. The Nasdaq hit new highs last week closing up 0.4 to a record of 6,048.94 on Friday while several of the largest names including Netflix and Microsoft continued their rallies.

And it does not look like its ending any time soon.

Traders celebrated the tech-heavy Nasdaq in the US. The event may cause some concern among investors as the Nasdaq first breached 5,000 in March 2000 and was followed quickly by the bust in tech stocks. It only reached that level again 15 years later in March 2015.

The index is up more than 11 per cent year-to-date, while the S&P 500 and Dow Jones Industrial Average are up a little more than 6 per cent in the same period. But the feeling in the market is that things are different this time around, with a supportive environment for many of the large-cap tech companies.

“If you look across the board, tech fundamentals have been very good in internet, software and semiconductors, so there’s been a good backdrop,” Joshua Spencer, portfolio manager at T Rowe Price, told CNBC last week.

Apple, Alphabet, Microsoft, Amazon and Facebook are all Nasdaq components and all stocks have risen sharply since the start of the year. Driving this is the fact that these 800-pound gorillas are becoming major players in the world economy, forging new areas of growth and touching on sectors that they had not been in before.

Microsoft, a company that was struggling just two years ago, has been enjoying a revival thanks to its cloud products, augmented reality (AR) and a new hardware push.

Facebook’s latest developer conference showed its bets on AR and how essentially it wants to be at the centre of what it hopes will be a post-smartphone world. Facebook wants to be the centre of your life, even being able to provide a place to share thoughts directly from your brain.

Take Amazon, an e-commerce juggernaut no doubt but not the biggest player in cloud computing and one that is investing heavily in content to rival media companies, artificial intelligence which could be used across a number of different sectors and even potentially driverless cars.

However, there is a little bit of concern in the market towards some of these behemoths. For example, Raymond James lowered its rating on Amazon’s stock to market perform from outperform last week, saying that it needs to show greater operating profit. But the analysts did not suggest its long-term prospects are broken.

And that is exactly the point with all of these majors. In the short term there may be wobbles in share prices as earnings miss here and there, or investors take profits with these high share prices. But in the long term Apple, Alphabet and their peers are positioned to dominate sectors including vehicles, cloud, mobile, media and anything else they dip their fingers into. It is a position none of them have been in before.

The risk, of course, is if these future bets do not pay off and that is when investors may get flashbacks from the year 2000.

Arjun Kharpal is a technology correspondent for CNBC in London.​

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