Amazing year so far for tech stocks

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Simon Brown: I’m talking to CMTrading’s Chief Trading Strategist, Fred Razak. Fred, thank you very much for your time today. Talk about tech stocks. Broadly speaking, it’s been a phenomenal year. The Nasdaq is up 38% after last year’s terrifying bear market. This year has truly been the year of technology, and we’re not even halfway through.

Fred Razak: absolutely. You were revived.

Simon Brown: If you look at some of these stocks, say Nvidia, they’re all AI-related. The future of technology is right there. There are stocks that are up 200%. Is AI really worth a watchlist? Surely it will be the future?

Fred Razak: It’s the future and it’s already here. This is the problem. You said he said Nvidia, just like I said for some reason he said Nvidia.yes it is [pronounced] “Invidia”, and I’m on your side. I say Nvidia anyway. This kind of technology is here now, and it’s really happening. It will take the next five to ten years for it to be fully applied.

That means the companies people are investing in, like Nvidia, Microsoft, and Facebook (now meta), are the crux of what really drives this race.

I remember the year 2000 when the Internet boom arrived. Everyone was trying to get the company back then, and they didn’t even know where it was going. But now it’s just big computer companies and big tech stocks vying with each other for space. And in the arena, what they offer the public will be interesting.

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Simon Brown: I remember there was a dotcom in 2000. [bubble]. I’m old enough to live in that era. You’re right about Google, for example. In the 90’s Google wasn’t even a household name, but now it’s the dominant search engine.

In a way, I think we’re trying to find big winners and stocks like Nvidia.microsoft [which] has clearly acquired a core interest, and OpenAI will probably be easy to spot. What about related brands? Or do you focus on the big things?

Fred Razak: At this point, it’s a bit difficult to say which one will be the next Google. It just went like wildfire because Google came along and got everyone to do their thing and produce better products. They took it from there and then made an acquisition on YouTube. they saw the following:

I think big companies like Microsoft are in a very good position right now. But remember, like everything else in life, you can’t do everything all the time. So there are probably a lot of opportunities around small businesses that are thinking about this idea now, but it will be another three or four years before it actually hits the market. So we have to see how the market reacts to it.

So what will happen in the field of AI? Will personalized health care become pervasive? [that] Will security be lifted?must see exactly [what], Because AI has many applications. Which ones are marketable is another story.

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Simon Brown: Yes, we all think of ChatGPT, DALL-E, etc., but really the range is almost endless.

I would like to quickly touch on the meta. You mentioned meta. Mark Zuckerberg really went all out for the Metaverse. Heh, they renamed the company to Meta. He seems to have defied it. Is this a good move for them in the sense that the Metaverse is coming, but not worth tens of billions of dollars each year right now?

Fred Razak: Well, if they’re going to be the best in their field, potentially they’ll be the biggest and dominant players in their field. I believe Facebook at this point has clearly passed its product lifecycle to some extent with the arrival of TikTok and Instagram.

All of these other kinds of social media sites have really brought Facebook to town, but Facebook hasn’t really reinvented it, so to speak. It looks about the same as it did 10 years ago.

So, I believe he recognizes the fact that his product has passed its life cycle and it’s time to invest in what could be tomorrow’s technology. Whether or not it actually “fails” will depend on the market. But at the moment, you are right, stocks are going up. It’s almost tripled from the lowest price. From November 2022 to now, this is truly a tremendous achievement.

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Simon Brown: And maybe it’s because we forget that some of these tech stocks are almost mature and meta stocks of them but they need new products in their arsenal I can’t. Otherwise, I hate to say it gets boring, but it loses its relevance. For example, you’ve seen it in the Microsoft Azure cloud. They have a desire to move into games while reinventing themselves. I was going to refer to the new CEO, but of course he’s been there for nearly a decade now.

Fred Razak: It’s also the fact that it’s not just the lifecycle. They have to move where the money is. These companies have so much cash that they could retire on cash only, but they want to remain relevant to the market and therefore want to add value to the market.

Now the gaming industry you mentioned is probably twice or three times the size of the tech industry.

The gaming industry itself is now one of the largest industries in the world. So it will be very interesting to see if this kind of company can evolve into the next type of product.

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Simon Brown: yes. Take a look at some of the new AAA game releases that are better than giant movies. That game really got popular.

I’d like to finish by looking at the rest of the year. As I said at the beginning, we are off to an amazing start so far into 2023. We’re not even halfway through yet. Do we take the view that this trend exists and maintain it? Don’t try to stop steam locomotives just because they are moving and have momentum.

Fred Razak: There is power, there is power. I’m not saying people don’t take money off the table. Remember we are still in an inflationary environment. The Fed is signaling that the possibility of tightening and rate hikes is not over yet. Therefore, these two factors should be considered.

The tech industry is one sector, not the whole. Real estate problems continue to this day as interest rates are very high.

Therefore, house prices are falling. There are other factors as well. Currently, the economic ecosystem has high unemployment and other factors that are not entirely healthy.

Whether the tech industry can withstand the risks of the economy as it did at the beginning of the 2020 pandemic, then we were sold and it was the tech stocks that lifted us up and fully recovered the market. bottom. .

I don’t know if you remember July, August. Tech stocks rose first. Microsoft hit new highs, Google hit new highs, Amazon hit new highs, and kind of reshaped the whole picture. The Dow hit a new high of 36,000. It was unprecedented. We didn’t expect to be there.

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So the question is, can we repeat the same now that the tech sector is pushing other markets? We’re not in the same kind of environment, so we’ll have to see that. We are in an inflationary environment. We have a high unemployment rate compared to where we are in the industry.

So it’s going to be kind of interesting. This is definitely something to scale even at this level. Facebook is trading in the $283 range, Microsoft in the $300 range, and Nvidia in the $438 range. Are these too expensive? Probably not. Because if you’re going to be a trillion, billion business in the next 5-10 years, you’ll find that these face values ​​are relatively small compared to the upside potential.

Simon Brown: I respect your opinion on that. Looking five years ahead [or] For 10 years, this price may not be so crazy,

Leave it alone. Fred Razak. CMTrading’s Chief Trading Strategist, thank you for your time today.