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There are only a few investments that were able to escape the downward pull in the wake of the corona crisis. Technology shares are among them. Individual stocks like Amazon (+26 percent) or Netflix (+29 percent) stand out particularly this year. And the Nasdaq 100 tech index from the USA is at least almost at the same level as at the beginning of the year. The Nasdaq index leaves the broad equity market far behind and, in relative terms, is now trading at a level similar to that at the peak of the TMT bubble at the beginning of 2000 (see chart). No wonder that more and more market experts are warning of a second tech bubble and its bursting.
But apart from a few exceptions of extremely optimistically valued stocks, the comparison with the year 2000 could not be weaker. For while at that time young companies without turnover were traded based on “eyeballs” and hope, today the world’s most powerful and profitable companies on the planet determine the index.
Tech giants are indispensable
The large US tech companies are not only enormously profitable and have been able to build up large cash cushions. Rather, Amazon, Microsoft, Alphabet, Facebook and Co. now provide the critical infrastructure for consumers and companies. The cloud services of Amazon, Alphabet and Microsoft are essential for companies that are now taking the next step towards digitalization. Facebook and Alphabet will take even more advertising dollars from the beaten newspapers, magazines and TV stations after the crisis. And who can really imagine a future without streaming services like Netflix?
In 2000, the P/E ratio on the Nasdaq averaged 100, today it is 25. That is not cheap. But understandable given the dominance of the large, indispensable corporations. The risk that the tech sector will collapse like it did in 2000-2003 is therefore very low in my opinion. The long-term trend (see chart) shows that 2000 was an anomaly, but the innovative companies on the Nasdaq have been doing better in the long term for 20 years.