Opinion: Tech rally is not all froth and bubble as COVID turns risk on its head
The fact that Tesla’s founder Elon Musk just overtook Warren Buffett on Bloomberg's billionaires index is the perfect metaphor for what's going on in equity markets around the world - the share price rise outperformance of the disrupter stocks and relative fall in value of old-line companies.
People that own these stocks won’t agree with the characterisation of the booming tech market as a bubble - they are too busy rejoicing their good fortune. But they can’t argue with the fact that the trajectory is extreme.The first is the question of why technology companies are experiencing such a stellar sharemarket run.
Some of the largest and most successful companies in the world - Amazon, Netflix, Alphabet , Facebook and Apple - are part of the backbone of the US equities market and justifiably so. Beneath these high profile companies are thousands of lesser-known artificial intelligence startups, fintechs and software services companies that are rapidly displacing old world companies and permanently changing the way we live.
It’s a slightly counterintuitive approach to favour less tangible assets during this very high-risk pandemic-induced recessionary period. But it actually makes sense. The ASX 200 technology index’s outperformance has been even more marked than that of Nasdaq - up 57 per cent since the beginning of April - leaving the broader market to eat its dust.
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