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It’s no secret that tech stocks have taken a beating this year. While some investors would see this as a reason to stay away, others see a buying opportunity. If you think it’s time to get into or get back into technology, here’s what you need to know.
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What companies are considered technology stocks?
First, it is important to define the technological actions. You probably know some of the big ones: Amazon, Google, Meta, Apple, etc. These are well-known names to most investors and most consumers. But there are plenty of other tech stocks, too. In fact, any company that sells products or services in the technology sector is considered a technology stock; hence, everything from cloud computing and software-as-a-service companies, to smart energy providers, computer hardware and microchip manufacturers, streaming services, and smartphone manufacturers. It is a large sector, so there are many companies to choose from.
Why invest in technology stocks?
Most technology stocks are traded on the Nasdaq exchange, so looking at the performance of the Nasdaq Composite Index is a good indicator of the health of the sector. From January 1, 2022 to August 31, 2022, the Nasdaq Composite was down 25.37%.
At first glance, this may seem like a very good reason to stay as far away from tech stocks as possible. But, looking a little closer, tech stocks may be about to experience a rally. While the days of making millions buying Apple or Google IPOs are a distant memory, there is still some room to run in tech stocks.
Indeed, tech stocks are no stranger to seemingly catastrophic downturns. In 2000, during the so-called “technological wreck,” the Nasdaq fell 25.2% from March to November 28. The sector fared slightly better in the Great Recession of 2008, falling just 13.8% in a similar period during that bear market.
Here are some tech stocks to watch in September 2022:
|Company||YTD Performance: As of September 8, 2022||Closing price on September 8, 2022|
|Micron Technology (MU)||-42.50%||$55.07|
|Citrix Systems (CTXS)||5.50%||$103.70|
|ON Semiconductor (ON)||0.50%||$70.55|
|SolarEdge Technologies (SEDG)||11.20%||$314.16|
|Fleetcor Technologies (FLT)||-7.50%||$213.80|
Clearly, some of these tech stocks, particularly some of the biggest names, are down a lot this year. Some are only slightly down, and some are even up to date. So what makes these stocks attractive buys now? This is how it breaks down.
The CHIPS and Science Act of 2022 was passed to encourage companies to make microprocessors in the United States, reducing U.S. companies’ reliance on foreign manufacturers for these tiny silicon chips that go into everything from washing machines to smartphones. and automobiles.
Some of the companies likely to benefit from this law include Micron Technology, GlobalFoundries, Wolfspeed, and ON Semiconductor. Micron Technology just announced plans for a new $15 billion factory in Idaho. GlobalFoundries is a contract chip manufacturer that can expect more orders due not only to the CHIPS Act, but also to the current chip backlog. Wolfspeed has already announced plans to build a new manufacturing plant in North Carolina to produce the raw materials used in chips for electric vehicles and other applications. ON Semiconductor manufactures semiconductors for automotive, industrial, medical, and aerospace applications, as well as 5G and Internet of Things applications.
Cloud Computing, Energy and Fintech
These are players in industries that had been moving ahead apace before the pandemic and, despite having some setbacks this year, appear poised to continue their previous upward trajectories.
SolarEdge provides smart energy technology to take advantage of the trend toward renewable energy. Citrix Systems is a cloud computing company that continues to benefit from the rise of remote work and the need for companies to provide flexible access to their computing systems. Fiserv provides fintech and payment processing technology to businesses around the world. FleetCor Technologies automates and digitizes business payments and employee purchases, making it easy for businesses to control their spending.
The tech geeks
Some technology stocks need no explanation. While the days of overnight IPOs making millionaires or billionaires are over, companies like IBM, Amazon, Google parent company Alphabet, and Apple continue to deliver long-term returns for investors. While some of these companies have declined significantly since early 2022, it may be time for a rebound for some of these tech titans. Industry analysts still hold these stocks in high regard, and it’s hard to argue with their past success.
Can’t decide which tech stocks to add to your portfolio? Consider the Technology Select Sector SPDR Fund (XLK) ETF, which tracks the technology stock index in the S&P 500. This exchange-traded fund gives you the ability to participate in any future upside in the technology sector while diversifying so that a single bad decision will not bring down your portfolio.
Tech stocks, while not the great companies they once were, can be solid long-term investments. The products and services they provide keep businesses running and have become irreplaceable in our personal lives. Companies in this sector will continue to innovate and their shares should provide strong long-term returns.
Information is accurate as of September 8, 2022.
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