Four Reasons Both Bulls And Bears Love Tech


When it comes to Q2 earnings, Wall Street analysts are more positive about the tech sector than any other, reports WSJ.

Of course “positive” is a relative term.

Earnings for the technology industry are estimated to be down 24% this quarter, and yes, that’s improvement from last quarter’s minus 26%.

Meanwhile, analysts expect the Standard & Poor 500 as a whole to drop as much as 36%.

Why is tech expected to fare the least worst?

  • Businesses are technology dependent: Technology is a key aspect of all business areas – for e.g. semiconductors for manufacturing, software for sales and distribution. As companies prepare for the recovery and increased business (and the government , their demand for technology will go up.
  • Technology is cheaper than people: WSJ says:” In a weak economy, the last thing businesses want to do is hire people,” says Sung Won Sohn, economist at California State University-Channel Islands. “Instead, they choose to raise productivity by employing tech.”
  • Demand from developing countried: The tech earnings forecast is also based on the assumption that fast-growing countries like India and China will have a increased demand for U.S. made high-tech software, processing chips and networking equipment. The theory is that these products have shorter life spans and hence need more frequent replacements.
  • We’d like to add another – it’s easier for companies to spruce up their IT infrastructure without incurring huge costs – through upgrades and customised software improvements.

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