Tech gains are far from over in this digitally connected world, says one analyst.
“Last year was a huge year for tech given the digital disruption theme. This is not going to end,” Jefferies analyst Brent Thill told Yahoo Finance Live on Thursday.
“We’re clearly in a completely different world in our opinion — a work from anywhere trend. A world where we’re being digitally connected by our devices,” he added.
Part the gains are attributed to fund managers who don’t want to be underweight in technology stocks.
The technology sector SPDR ETF (XLK) is up 22% year-to-date, and almost 100% higher over the last 2 years. Netflix (NFLX) hit an all-time high on Thursday. Facebook (FB) is up 38% year-to-date. Apple (AAPL) recently broke out above $150 a share, up 15% year to date.
“I think investors are looking at these stay at home names, whether it’s Zoom (ZM), Amazon (AMZN), Netflix as 2022 stories and are looking later in this year toto put more money to work back into that sector,” said Thill.
Some investors worry that rising inflation and the prospects of higher interest rates in the future will hit big tech growth companies. The concern caused a rotation out of tech and into cyclicals earlier this year.
Thill acknowledges it’s something to keep an eye on, but the long term trends matter more, he said.
“Go back to the multi-year journey. Did you want to be overweight Google, Facebook, Apple, Microsoft (MSFT), and the answer is yes.”
“I don’t think we’re going back to the old world and the old school industries,” he added.
As for regulatory concerns over anti-trust issues, “use it as an opportunity to invest,” said Thill.
He noted Microsoft’s stock was trading around $30 a share when the company was going through its anti-trust probe in the late 90s. The stock is now at $300.
And when Facebook’s Mark Zuckerberg testified before Congress over privacy concerns in 2018, the stock was sitting below $150 per share. Today it’s trading at around $376.
“These companies will find a middle ground,” he added. “I don’t think they’re broken up. We don’t think there’s a case.”
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre