Inflation has been a thorn in the side of technology stocks this year, but when certain sectors hit a rough patch, it’s necessary to re-focus on the fundamentals.
The Nasdaq 100 is down about 11% for the year as inflation worries are throwing a roadblock in front of technology. Nonetheless, strong fundamentals outline the sector, which should give investors and traders alike something to look forward to heading into the second quarter of 2022.
“The S&P 500 technology sector capped a strong year in Q4 2021 with earnings rising 22.7% YoY. Although this strong performance was partly due to a somewhat lower than usual base in Q4 2020, earnings are expected to grow further in 2022 by 12.3%,” wrote market analyst Nicholas Istvan Kiss in a Seeking Alpha article.
“The trend of EPS estimate revisions in the sector has been positive so far this year, as of the end of 2021 analysts predicted ‘only’ a YoY increase in EPS of 10%, which increased to 12.3% since then,” Kiss added.
One of the major drivers for tech fundamentals will be cloud computing, according to Kiss. With the big names like Amazon and Microsoft in somewhat of an arms race to see whose cloud computing technology is the best, this competitive drive could further fuel tech.
“One of the main factors behind strong technology fundamentals is the increasing adoption of cloud services,” Kiss said.
Triple Exposure to QQQ
Traders looking to lever up their exposure to tech can look to funds like the ProShares UltraPro QQQ (TQQQ). The fund essentially comes with triple leverage to the heavily traded Invesco QQQ Trust (QQQ).
Per its fund description, TQQQ is a leveraged ETF that seeks a 3x return on the daily performance of the Nasdaq 100 Index. The index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.
For more news, information, and strategy, visit the Nasdaq Investment Intelligence Channel.