How can the tech sector still grow on the stock market?

After a (very) complicated year 2022, technology companies have again achieved good results on the stock market in recent months. This is reflected in the Nasdaq Composite, which continues to rise.

Why is this important?

During the corona pandemic, many tech companies experienced tremendous growth, aided by the lockdowns around the world. Last year, after reopening, most of them took a hard hit, including giants like Meta, Amazon, and Apple. To bounce back, they reached for the same weapon: fired. Now, however, they’ve been refreshed with a promising new weapon in their arsenal: AI.

In the news: the signals are green again for the tech sector.

  • After a red year 2022, shares of technology companies have continued to rise since January. At the end of this week, the Nasdaq Composite even reached its highest point of the year.

Details: The Nasdaq Composite reaches its highest level since the summer of 2022.

  • On Thursday, the Nasdaq Composite closed at 12,688.84. This is the highest level of the year and also the highest since August 2022.
    • As a reminder, this index measures the overall performance of all stocks listed on the Nasdaq, the exchange focused on technology companies.
  • The growth of technology companies has continued since the beginning of the year.
    • In January alone, the Nasdaq Composite rose 10.7%, a jump higher than its average over the past 40 years.
    • In the second quarter, the index has already risen by more than 2.3%. Estimates suggest it could rise 5.6% by the end of June, which is also higher than usual numbers in years when January was already strong.
  • In short, everything is going very well.

Is this going to stay that way?

And now: what can we expect for the second half of the year?

  • The second half of 2023 is expected to continue to be a good year for technology companies. At least that’s what Jessica Rabe of Datatrek, a market analysis firm, thinks.
    • “While the third quarter can potentially be turbulent, fourth quarter returns may even outperform those of the first quarter,” she said as reported by Markets Insider.
  • However, the analyst mentions two events that could push tech stocks even higher in the coming months:
    • The continued profitability of the companies involved in the coming months is essential. In the first quarter, most of them posted higher-than-expected profits.
  • A fall in interest rates by the Federal Reserve would be very good news. For this to happen, there would have to be a (slight) recession.
    • In early May, the Fed made its tenth consecutive rate hike since March 2022, pushing rates to 5 to 5.25%, the highest level in more than 15 years.
    • At the same time, the US central bank has not ruled out a pause soon.
    • Some analysts say there could be a decline rather than a pause by the end of the year. But this is still very uncertain at the moment. (kg)

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