Technology plays a vital role in modern society as it is heavily integrated into every sector. Not only does it affect the way we communicate, learn, and work, but the continuous innovations from artificial intelligence, Saas, IoT, to self-driving technologies are revolutionizing the world. The push towards digitalization has led to the increasing adoption of technology among corporations and consumers. In 2021, the global tech industry was estimated to be valued at $5 trillion, with the U.S. holding a third of its market share. Being the largest single segment of the market, technology plays a significant role in the capital markets—with the Big Five Tech Giants capturing 15% of the S&P 500 index.
The pandemic had left a positive impact on the tech industry, as the social distancing orders shifted consumer spending towards e-commerce and increased dependence on technology. This enabled companies such as Amazon to thrive, which recorded a 27% increase in total sales surpassing $113.5 billion in 2021. Ongoing research and development, in addition to the pipeline of new products, has demonstrated the long-term growth prospects of the technology industry. This has made FAANG and various technology stocks a popular investment opportunity among Wall Street and retail investors.
Analyzing tech stocks can be difficult, especially when there are so many successful companies to choose from. For profitable, mature companies, a useful metric is using the price-to-earnings ratio to determine how highly it is valued by the market. However, this is not possible for many early stage tech companies, therefore analyzing their growth prospects is crucial to determine their value. Investing in tech stocks through exchange-traded funds (ETFs) is also great way to avoid risks, along with conducting thorough due diligence prior to investing in a company.
Technology Investor is a publication educating investors on how to analyze high-growth technology companies and provide important updates on the innovative disruptions occurring in the tech industry.
