After a tough 2022, technology stocks are flying again. Shares in electric car maker Tesla are up 59.19 per cent so far this year, while circuits and graphics specialist Nvidia is up a thumping 99.69 per cent.
Last year, the so-called FAANG stocks — Facebook owner Meta Platforms, Apple, Amazon, Netflix and Google-owner Alphabet — crashed and burnt.
Now, they are on fire, but in a good way. Meta was scorched by chief executive Mark Zuckerberg's doomed love affair with the Metaverse, but this year its share price is up 89.03 per cent after investors decided he was over it.
Watch: Meta develops first speech translation system for unwritten languages
Apple has shot up 38.92 per cent, Amazon, Alphabet and Microsoft are all up about 30 per cent, and streaming service Netflix has climbed 16.89 per cent.
“Tech is back on top,” says David Older, head of equities at asset manager Carmignac — and he reckons there is more to come.
“With valuations well below their Covid peak, increasing focus on profitability and excitement around artificial intelligence, the sector should continue to perform well.”
Tech firms have absorbed important lessons from the recent sell-off, Mr Older says, and are shifting their focus from growth-at-all-costs to improving profitability instead.
“Tesla’s Elon Musk has radically cut Twitter’s cost structure by reducing headcount by 75 per cent, while Mr Zuckerberg has referred to 2023 as the ‘year of efficiency’,” Mr Older says.
This should help to boost margins and earnings per share growth, while AI might even live up to the hype.
“At the moment, it looks more like an ‘iPhone moment’ than a potential disappointment, as the Metaverse, Internet of Things, autonomous driving and blockchain have been to date,” Mr Older says.
Cloud infrastructure specialists such as Microsoft Azure, Amazon AWS, Google and Oracle could benefit from the AI revolution, along with Nvidia and AMD, he adds.
Victoria Scholar, head of investment at Interactive Investor, says repeated aggressive US Federal Reserve interest rate increases battered Big Tech but investors are flooding back as the cycle peaks and tech stocks look like better value.
“After years of overzealous expansion, they have been cutting costs to combat high inflation, softening consumer demand and falling ad revenue,” Ms Scholar says.
Investors should exercise caution as “piling in after a big rally” can backfire, but there are opportunities out there, she adds.
“Many tech stocks remain sharply below their recent highs, while US inflation is falling and jobs are resilient.”
After a disastrous 18 months for Big Tech, this year could not be more different, says Sam North, market analyst at eToro.
The recent US earnings season delivered one positive surprise after another and a lot of the good news is now priced in.
“Although, tech may now need to take one step back before it can take two steps forward,” Mr North says.
Wider political and economic challenges may drive investors into more defensive sectors, such as wrangles over the US debt ceiling, the banking crisis and interest rate expectations, he adds.
“Consumer staples and utilities could benefit over the next couple of months before investors invest further in this tech rally.”
Investors should wait to see if there is a summer dip, Mr North suggests.
“The market is at a crossroads but a strong end to the year can’t be ruled out.”
Lombard Odier analysts are warning of a “tug of war” between robust long-term fundamentals and today’s pricey stock valuations.
Yet first-quarter online advertising and e-commerce did better than expected, while headcount reductions and hiring freezes should help shield profitability, the analysts say.
The tech sector contains plenty of solid, profitable companies but also has a large number of low-profit enterprises that will struggle as high interest rates drive up the cost of capital, says Bill Blain, strategist and head of alternatives at asset manager Shard Capital.
The life-cycle of invention, innovation and profitability has become very short, and many investors fear it will be overturned by the AI
Bill Blain,
strategist and head of alternatives at Shard Capital
“Businesses will have to adapt investment plans for the long term, rather than the short-term inflationary spike many expected,” he says.
Tech is highly vulnerable to paradigm shifts and new ways of doing old things better, faster and cheaper, and few firms survive at the top for long, he adds.
“Apple has dominated for 20 years but that doesn’t mean it will dominate for the next 20.”
Profitable business models can become obsolete overnight due to new entrants or regulation.
“The life cycle of invention, innovation and profitability has become very short, and many investors fear it will be overturned by AI,” Mr Blain says.
He predicts that AI will deliver an “evolutionary shock” by inventing whole new business sectors and forcing existing businesses to change the way they do everything.
Coders and software will be the big losers as “AI can do it better, effectively for free”, while hardware firms will be boosted by demand for new servers and tech tangibles.
Investors cannot afford to ignore tech, but they should not go all in, Mr Blain adds.
“The need for dull, boring, predictable returns, the desire to protect capital in a time of increasing uncertainty, and the fact tech is now paying much more for scarce capital, leaves fewer opportunities for windfall profits.”
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After the recent surge in Big Tech, investors should tread carefully, says Vijay Valecha, chief investment officer at Century Financial.
“The rally could continue for a few months but when the Fed finally pivots and cuts rates, the market may have already moved and we could witness another sell-off instead.”
A US recession would deal another blow.
“Cautious investors may find it more prudent to stick with large-cap tech companies that possess substantial cash reserves, enabling them to navigate through challenging times.”
As ever, diversification is crucial, within and across asset classes, Mr Valecha adds, while naming several tech-focused exchange traded funds for investors who understand the challenges but are keen to get exposure.
His favoured ETFs include the Invesco QQQ Trust Series 1, which tracks the Nasdaq 100 Index and Cathie Wood’s popular but volatile ARK Innovation ETF, which invests in disruptive innovation.
Mr Valecha also highlights Vanguard Growth ETF, the Technology Select Sector SPDR ETF, and two specialist funds, VanEck Semiconductor ETF and iShares Cybersecurity and Tech ETF.
As ever, aim to hold for a minimum of five years but ideally much longer than that. This year's adrenalin rush may ease up but tech will be on top again soon - and investors may find it difficult to resist..
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Terror attacks in Paris, November 13, 2015
- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany
- At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people
- Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed
- Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest
- He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Zayed Sustainability Prize
Dubai works towards better air quality by 2021
Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.
The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.
These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.
“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.
“We’re in a good position except for the cases that are out of our hands, such as sandstorms.
“Sandstorms are our main concern because the UAE is just a receiver.
“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”
Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.
There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.
“There are 25 stations in total,” Mr Al Daraji said.
“We added new technology and equipment used for the first time for the detection of heavy metals.
“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
