Techs crash on outstanding results, time for investors to change strategy?

The latest results from the techs were impressive, shares relating to the six most well known techs have lost three quarters of a trillion dollars in value since the early summer.  I think that a buy opportunity lurks, but investors may want to change strategy.

Article updated: 5 November 2018 at 10:00am Author: Michael Baxter

Results

The latest results were impressive:

  • Alphabet: saw revenue increase by 22 per cent,
  • Amazon:revenue up 29 per cent, net income rose ten-fold
  • Apple: revenue up 20 per cent, earnings were up 41 per cent
  • Facebook: revenue up 33 per cent
  • Microsoft: revenue up 19 per cent, net income surged 34 per cent
  • Netflix: revenue up 36 per cent, net income rose 2.1 times

And shares crashed

 

Source: Yahoo Finance.

Why the fall?

Working out why the fall happened is not hard.

The markets had just got carried away, there was too much hope invested in techs. The results were really impressive, but markets expectations were for something miraculous.

The techs failed to deliver a miracle, and so they crashed.

But then that sums up the markets right now. There are lots of reasons to be pessimistic in general: global debt is excessive, we are seeing the return of fascism, protectionism rears its ugly head, interest rates are being forced up by fears of inflation; the markets are way too relaxed.

What to do?

In the past, techs have been a pretty good hedge against wider economic fears. They were among the first to recover after 2008, for example.

But I can feel a change, I feel it in my bones.

We currently sit betwixt technologies.

The smart phone, internet revolution has peaked.

We are now entering the Internet of Things and AI revolution.

McKinsey has forecast that AI could boost the European economy by 10 per cent between now and 2030. But it expects the Chinese economy to benefit by more than double that amount.

Voice recognition is where the next consumer revolution lies, to be followed by virtual and augmented reality and then a health tech revolution.

But before that I see a revolution in AI transforming business. It has been estimated that over 50 per cent of all tasks carried out in business can be taken over by AI.

I don’t want to get into the jobs versus automation debate today.

But I think that for the next few years, the big bucks will got to companies that support the business revolution.

That’s Microsoft, Amazon and Alphabet via their Cloud services, maybe even the likes of Oracle.

Watch this space. This idea will evolve, but B2B maybe the tech area to watch.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

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Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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