Near-Term Earnings Gyration Shouldn’t Shake Long-Term Tech Faith

The Nasdaq 100 Index (NDX) surged 10.64% in January, confirming that momentum for mega- and large-cap growth stocks — among last year’s most battered asset classes — is rebounding.

That resurgence could be imminently tested as a slew of fourth-quarter earnings reports from members of the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) are due out this week. Both of those exchange traded funds follow NDX.

While there’s no denying the importance of earnings reports and the fragile nature of tech earnings updates — Intel (NASDAQ:INTC) and Texas Instruments (NASDAQ:TXN) confirm as much — some market observers argue that investors should take a long-term view of tech and not be rattled by near-term, earnings-induced gyrations.

“Whilst all the major U.S. indexes ended lower, the tech-laden Nasdaq recorded a sharp loss as investors brace for quarterly reports from the major tech players, including Meta Platforms reporting results on Wednesday, followed by Alphabet Inc, (Google), Apple, and Amazon on Thursday,” wrote deVere Group CEO Nigel Green.

Green acknowledged that investors are grappling with tech-specific concerns, including still-high interest rates and a recent spate of massive layoffs by Silicon Valley companies. Still, he encouraged investors to be on the right side of the long-term tech trade.

“These tech titans – which got carried away during the pandemic era amid soaring revenues and profits and which are now being forced to regroup – still have piles of cash, in some cases hundreds of billions of dollars, and remain enormously profitable,” noted Green.

It’s accurate to say that the current environment isn’t yet fully hospitable to QQQ and QQQM member firms, but that doesn’t mean it’s the wrong time to consider these ETFs. In fact, if global economic growth slows this year, as many economists believe it will, high-growth tech stocks could provide some protection for investors.

Couple that with exposure to disruptive trends held by many QQQ and QQQM components, and the 2023 outlook for tech stocks has room for pleasant surprises.

“Artificial intelligence, blockchain, fintech, augmented reality, cryptocurrencies, green energy, health tech, smart devices, data aggregation tools, electric vehicles, these sectors, amongst so many others, underscore that the future is tech,” concluded deVere’s Green. “Despite the short-term turbulence, the long-term trend of digitalisation hasn’t changed, and won’t, which means there is plenty of reason to be bullish for big tech.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.