The NASDAQ Composite reached an all-time high several weeks ago, bringing in millions of dollars from its Big 5 companies. After the bell rang on Thursday, April 27, internet companies Google and Amazon surprised when they topped consensus estimates. In the most recent quarter, Google’s revenue rose to $20.12 billion, above the projected $19.76 billion. The company raked in a net income of $7.73 a share, easily beating analysts’ estimates of $7.42. Meanwhile, Amazon reported profit of $1.48 per share, nowhere near the earnings of $1.03 per share predicted by analysts. The online retailer also posted a revenue of $35.71 billion, beating Wall Street analysts’ forecasts of $35.39 billion.
So, are we in another tech bubble? What will the future look like for NASDAQ and the tech industry?
It is important to address that the NASDAQ has exceeded expectations before. The NASDAQ reached record highs in the late 1990’s and early 2000’s during the notoriously popular dot-com bubble, a historic period of excessive speculation, due to the rapid spread of the Internet. This period of tech companies and investments did not end well for investors, and Wall Street took 15 years to recover, not returning to 5k index until March 2015.
Ryan Detrick- senior market strategist at LPL Financial, says that the NASDAQ is more diverse, and has more secure stocks, therefore making it more stable than in the late 1990’s. “Tech stocks don’t make up nearly as much of the NASDAQ as they once did. Incredibly, tech is less than half of the NASDAQ today. This could be a positive sign, as this influential group isn’t seeing the type of love it did 18 years ago, and the NASDAQ isn’t so top heavy in one group,” he wrote in February.
Many people have started to compare this upward trend to the Dow Jones Industrial Composite, which includes tech companies like Intel and Apple and is another popular gauge of tech-sector performance. Looking at this data Detrick argues that tech, has more pent-up potential. He says that it can still go higher because it is comparatively not as rich as similar moves in other sectors, and it has more “latent energy” to carry it to new heights.
The NASDAQ is on an upward trend that will hopefully continue. As the future of the tech industry unfolds it is important to recognize that the industry could collapse once again, like the dot-com bubble. However, it could also continue expanding, enlarging the role technology plays in our daily lives.