Analysing The Technology Sector
The technology sector consists of a category of companies that relate to the research, distribution and development of goods and services that are tech-based. The sector is made up of a variety of businesses, including electronics manufacturers, software developing companies, computer manufacturers, and other companies related to information technology.
The sector offers a wide range of products and services for customers and other businesses. Examples of consumer products are computers, mobile devices, home appliances, televisions, and wearable technology, to name a few. On the other hand, the business sector is made up of companies that are dependent on innovations that come from the tech sector. For instance, systems for managing logistics, protecting databases and providing vital information and services that companies can use to make strategic and informed decisions.
The tech sector is one of the most attractive sectors for investors in any economy. For instance, in the United States, companies like Apple, Google, Amazon, and Microsoft boast of being the biggest in the country. These companies are also significant drivers of the growth of the technology market.
The Growth of the Technology Sector
According to Investopedia, traditionally, the technology sector was more rooted in semiconductors, computing hardware, and communication equipment. For many years the sectors mentioned above took up the majority of the sector. The communication area specifically made up most of the sector, following the introduction of new communication technology. After a while, software companies started to emerge. The addition of these companies expanded the technology sector.
Today, the sector includes anything that is based on coding. It wasn’t long until it grew further, following the introduction of internet companies. As the use of the internet grew across the world, so did the technology sector. Some internet companies that became part of the sector include media and content companies. These companies use code as the basis of their operations. The establishment of e-commerce, social media companies, and the cloud led to the growth of the industry even further.
Currently, the technology sector is made up of a diverse range of companies and subsectors. The subsectors are just as significant as the rest of the industry. The main subsectors include semiconductors, software, networking, hardware, communication, and the internet. Each of the subsectors can be broken down into sub-subsectors. For instance, the hardware subsector consists of wearables, laptops, and desktops peripherals and hard drives, to name a few.
Drivers of the Growth of the Technology Sector
Below are some of the main drivers of the growth of the technology industry:
• Creativity- This is the primary driver of the success of the technology industry. It is through creativity that significant advancements have been made in the industry. For instance, the software and coding industries depend on wits and creativity for the development of apps and a wide variety of platforms.
• Growth of the global economy- The overall growth of the global economy has also significantly influenced the development of other sectors, like the tech industry. The tech industry, specifically software developing companies, significantly depend on financial assistance from other companies and investors. It is only through economic growth that investors from other sectors would be able to spend their money funding tech innovation. The growth of other sectors has also resulted in the need for further advancements in the tech sector. For instance, the need for better storage solutions resulted in the establishment of the computer and later, the cloud.
• Growth of the education sector- It is though the growth of the education sector that more people are gaining knowledge that is helping them advance the tech sector. The introduction of more IT courses and computer education from the smallest levels has significantly helped to drive the growth of the sector. Education has also played an impact on the growth of other sectors in the economy, hence the overall economy.
Threats to the Growth of the Industry
• The longevity of the aging societies- The ageing population is having the hardest time getting acquainted with the advancements in the technology industry. The improved medical industry has led to the growth of the ageing population. Their growth threatens the development of the industry.
• Increased cases of cyber insecurity- Cyber insecurity is one of the main issues that the tech industry is facing at the moment. As time passes, the issue continues to affect more people. If the permanent and effective solution is for the issue is not found, more people and businesses would instead opt out of some technological trends because of fear. Theft of company information has resulted in the collapse of several corporations. This has sprout fear among other people.
Trends in the Technology Industry
The biggest trends in the technology industry are the cloud and artificial intelligence sectors. These two sectors have been dominating the industry for a few years now.
More companies are recognising the need for AI in the advancement of their processes. AI capabilities are also significantly assisting in the continuous innovation and growth of different sectors. These sectors are expected to dominate the technology economy in 2020, as well. Processing power and big data companies are also expected to increase employment in the tech industry by at least 5 per cent in the next year.
According to Deloitte, increased concerns about cloud and cybersecurity is an opportunity for cloud providers. The providers are likely to introduce security features that businesses and individuals could benefit from. The issue is also a diver of hybrid cloud adoption. The solutions continue to gain traction in different industries, especially the finance and government sectors. Hybrid-cloud will also serve as a stepping stone for the digital transformation.
More companies are also adopting multi-cloud solutions, and the solutions combine cloud services from more than one provider. Deloitte reports that more than 55 per cent of enterprises are already using AWS, Microsoft Azure, and Google Cloud.
Using the multi-cloud technology is helping companies to assess the strengths and weaknesses of the different vendors before committing to working with them for the long term. Establishments are also using the cloud to assist them in optimising their costs. It also helps companies to avoid lock-in issues. This year, cloud providers are expected to develop features that allow organisations to be able to operate in different environments.
The Tech Market Size
According to Statista, the global Tech market has an estimated worth of 3.36 billion US dollars by the end of 2019. In Canada, the growth of the tech market is mainly dependent on Toronto’s tech sector. Toronto, being the largest city in Canada, is also known as the tech hub that is giving American tech cities significant competition. The Canadian tech sector is worth an estimated 3 billion US dollars, according to IT World Canada.
On the other hand, the Asian tech market is estimated to be worth more than 20 billion US dollars, with APAC Robotics Technology expected to make a revenue of 29.5 billion US dollars by the end of 2020. According to Allied Market Research, the top subsectors of the Asian tech market are AI, computer science, bioengineering, nanotech, and integration of electronics, as well as rob development.
Companies with the Best Value Tech Stocks
Below are companies that currently have the best technology stocks:
• Seagate Technology PLC- This company focuses mainly on the development, production, and distribution of data-storage solutions and products. Some items that the company manufactures include hard disks and data recovery services. This company continues to grow because, at the moment, investors are buying technology related shares.
• Xeron Holdings Corp- This company is a provider of print technology solutions. Some of its products include imaging, printing, data analytics, and automated solutions. The company aims at helping organisations improve their productivity.
• Nortonlifelock Inc- This company focuses on the development of cybersecurity solutions that protect online privacy, identity, the safety of electronic devices, and other home networks.
• Advanced Micro Devices Inc- This is an international semiconductor manufacturer. It sells microprocessors, chipsets, graphics, video, and multimedia products. It also partakes in testing, assembling, and packaging solutions. This company recently recorded the most significant revenue growth in the stock market.
• Apple Inc- Apple is a designing and manufacturing company that develops products like smartphones, computers, and wearables. The company is also responsible for the establishment of software, services, and networking solutions. It is one of the most popular companies in the world and is also among those with the best momentum in the stock market.
Other bigshots in the tech industry, like Amazon, Microsoft, Oracle, Netflix, Snap, Twitter, and Zoom are also maintaining their position in the market. They have reported some momentum in the past months. However, the fact that shortselling technology related stocks are the trend is impacting their position.
Reasons to Go Long in Tech Shares
A long position refers to the buying of a security like a stock or shares, expecting that there will be a rise in value. Below are some reasons why you should opt for long-term shares in the tech industry:
• Growth of service revenue- While some major tech companies like Apple may be experiencing poor results in the stock market, investors still opt for long term shares because the service segments of such companies continue to grow and are expected to reach an all-time high in the next year. Regardless, some companies still prefer to go short in technology shares.
• Growth of users- The tech industry continues to attract more users as time goes by. This makes it the best long-term investment as different countries embrace tech advancements.
• Increased focus on health and privacy- Tech companies are currently focusing on health and privacy solutions, especially following widespread issues of hacking and data breaches. This move is bound to yield excellent results in the long-term.
Reasons to Go Short in Tech Shares
A short is a directional trading or investment technique. It is when the investor sells shares of borrowed stocks in the open market. This move could be triggered by high chances that the security of shares is likely to decrease. Below are some reasons why you should consider short selling technology related stocks:
• Innovation- Innovations are likely to gain more traction than those that have been in existence for a long time, hence the reason why investors opt for shorting technology stocks.
• Cloud insecurity- Cloud insecurity is causing more establishments to move away from the trend, hence making more investors opt for shorting tech stocks.
• Diversity- The establishment of new companies and tech platforms helps in reducing the traction that some leading companies were receiving. For instance, the introduction of new network providers is likely to strip some network providers of their positions in the technology stocks market.
Impact of Covid-19
The effects of the covid-19 pandemic on the technology sector are extensive. Here are some of these impacts:
• The disruption of the supply of raw materials in the tech sector is making it difficult for companies to meet the needs of their clients and partners
• The electronic value chain is also facing a lot of challenges
• The disruption of the supply of human resources, following restrictions of movement and social distancing regulations in different parts of the world
• The impacts of the virus on the global economy are also influencing the industry. Investors are pulling out and putting a stop to further financing. Lack of financing is also making it hard for new companies to come up.
On the positive side, the pandemic has increased remote working, which is a win for the tech industry. There has been a rapid focus on the evaluation and de-risking of the end-to-end value chain.
