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According to Bernstein, the technology stock boom of the last decade is over. After outperforming by an annual average of 8.6% over the previous eight years, tech companies’ performance has changed dramatically in 2022. Technology company valuations are up and growth expectations are modest. That could mean technology is entering a new period of moderate growth, Tony Sacconaghi, senior analyst at Bernstein, said in a note on Monday. “We are concerned that the relative performance of tech stocks risks becoming more muted over the next few years, similar to the lost decade after the tech bubble burst,” he said. “The important thing is that we believe that tech stock picks are likely to matter much more over the next five years, and a new group of tech leaders may need to emerge to drive the next big tech rally.” Technology stocks are expected to rise at a slower rate than the market as a whole this year. Over the next five years, Bernstein predicts that the technology industry will earn higher returns than the rest of the market, but not as high as the historical average. Sacconaghi noted that in 2004, even with tech company valuations cut and profit growth forecasts like today’s, the sector lagged behind in seven of the next 10 years and 9% over the entire period. The biggest names in tech today – Meta, Amazon, Apple, Microsoft and Alphabet – account for 50% of the total tech sector market capitalization and account for 73% of the tech sector’s outpacing growth between 2014 and 2021. Their forecast of sustainable growth will continue. Sacconaghi said a “significant” slowdown in the tech sector is expected over the next two years. But like the “lost decade”, the market has found new leaders to lead the next big tech rally, and it may have to do so again in this new period, Sacconaghi said. “A key reason for the low performance of the technology sector in the period 2004-2013 was the weakness in the shares of the largest technology companies of that time – Microsoft, IBM, Intel, Cisco and Dell – against the backdrop of the end of the PC era and the emergence of smartphones and cloud computing. ,” he said. “And it took a while for a new era of tech leaders to emerge.” CNBC’s Michael Bloom provided the report.
Credit: www.cnbc.com /
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