Outside the Box: Tech stocks have been minting money this year, but many investors fear getting burned if they buy the rally now

by | Feb 4, 2023 | Stock Market

Microsoft kicked off a slate of technology earnings earlier this week, reporting largely solid numbers that could have quickly been deemed a victory for technology stocks overall if not for CEO Satya Nadella’s cautious guidance. Investors surmised that the technology sector broadly could be in for some hard knocks — even after its impressive January bounce.

While Microsoft
has been a bellwether for growth over the past few years, it, along with its FAANG compatriots, including Amazon.com
and Alphabet
are under close watch. Recession headlines and the hawkish U.S. Federal Reserve are headwinds for the technology sector and delay its recovery. A wave of layoffs has also raised questions about tech’s near-term strength. No surprise that the markets are trying to determine whether a bottom is in, and a return to growth names is a real option. This could be an opportunistic moment for tech companies to get ready for the growth cycle. Tech will be back, and we’re seeing positive signs of that now. While devices, peripherals, and semiconductors look to have a longer road back, some big players have stood out during this earnings season so far — with mixed market reactions. Here are some to watch:  ServiceNow:
A beat and raise for the fourth quarter with strength across the board. I’ve called this one for some time, and nothing has changed. ServiceNow CEO Bill McDermott’s confidence in the company mid- to long-term continues to be evident in both results and guidance. I spoke with McDermott on the company’s earnings day. He is convinced that even as the U.S. economy slows, companies won’t stop investing in technology. They will seek to do more with technology under hiring and revenue growth constraints. Automation, analytics, AI and the cloud will be paramount to efficient execution, and ServiceNow effectively ticks all those boxes.  IBM:
IBM was another name I had expressed bullishness about over the past few quarters due to its strong enterprise ties and critical capabilities to enable businesses to do more with their current technology. CEO Arvind Krishna has been on the record recently, claiming that technology will grow 2%-4% faster than GDP in the coming periods and that IT will be the most protected line item in any enterprise budget. This se …

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