On Monday, it seemed almost impossible not to make money by betting on tech stocks -- nearly any tech stocks.
Such titles are all the rage on the market just now, with a host of tailwinds propelling them forward. On Monday, beneficiaries in many tech niches abounded. Components supplier Super Micro Computer (SMCI 8.89%), data warehousing specialist Snowflake (SNOW 3.69%), and next-generation database company MongoDB (MDB 4.83%) all bumped more than 3% higher in price.
Good and bad news from Asia
One of the stronger winds providing a lift to the tech sector as a whole has been the semiconductor industry. Last Thursday one of the sector's guideposts, the powerful Taiwan Semiconductor, posted fourth-quarter results.
Happily for the tech world and the folks who like to invest in it, the company not only beat on the consensus analyst revenue and profitability estimates but also guided for solid top-line growth of 20% year over year at a minimum for the entirety of 2024.
Speaking of Asia, another factor in the advance of U.S. specialty tech stocks Monday was the decline of top names on the Chinese market. China has been contending with a clutch of tough macroeconomic challenges, and on Monday many investors decided to pull their money from its publicly traded companies. Since many of these are in the tech sector, surely at least some of that cash was reallocated to U.S. stocks.
Meanwhile, the road ahead for our economy looks increasingly more clear. The Federal Reserve aims to cut its key interest rate several times this year, and some market pundits are speculating that the first slice could come as soon as March. Lower rates mean cheaper borrowing costs for companies, and they tend to push investors into riskier assets -- for instance, specialty tech stocks.
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The market is also anticipating a major and sustained boost from the adoption of artificial intelligence (AI), which has quickly become a useful, valuable technology for both businesses and individuals. Nearly every tech company, no matter its focus or size, is expected to develop AI capabilities within its product lineup.
That isn't necessarily fast or cheap to do, but the rewards are potentially vast, as the right kind of AI enhancements can vault a product or service well ahead of the competition. U.S. techies are well aware of this, and many have wasted little time developing AI add-ons and improvements.
Can this rally continue? I believe so, as we're just beginning to exploit AI, and the broader economy looks to be in strong health while China is likely to continue stumbling. Even with some of the recent price upticks in the sector, it feels as if there's more room to run for such companies.
