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It’s no secret that tech stocks have taken a hit this year. While some investors would see this as a reason to stay away, others see a buying opportunity. If you think it’s time to get into—or get back into—tech, here’s what you need to know.
Read more: Do you want to diversify in a bear market? Consider these 6 alternative investments
Which companies are considered tech stocks?
First, it’s important to define technology stocks. You probably know some of the big ones: Amazon, Google, Meta, Apple, and so on. These are familiar names to most investors — and most consumers. But there are plenty of other tech stocks as well. In fact, any company that sells products or services in the technology sector is considered a tech stock — anything from cloud computing and software-as-a-service companies to smart energy providers to manufacturers of computer hardware and microchips to streaming -Services and manufacturers of smartphones. It’s a big sector, so there are many companies to choose from.
Why invest in technology stocks?
Most technology stocks trade on the Nasdaq exchange, so looking at the performance of the Nasdaq Composite Index is a good indicator of the health of the sector. From January 1, 2022 to August 31, 2022, the Nasdaq Composite is down 25.37%.
At first glance, this might seem like a really good reason to stay away from tech stocks as much as possible. But if you look a little deeper, it’s possible that tech stocks are on the verge of a rally. While the days when millions were made by buying Apple or Google IPOs are a distant memory, there’s still room to play in tech stocks.
In fact, tech stocks are no stranger to seemingly catastrophic downturns. In 2000, during the so-called “tech wreck,” the Nasdaq fell 25.2% from March through November 28. The sector fared slightly better in the Great Recession of 2008, losing just 13.8% over a similar period during that bear market.
Here are some tech stocks to watch in September 2022:
|company||YTD performance as of September 8, 2022||Closing price on September 8, 2022|
|Micron Technology (MU)||-42.50%||$55.07|
|Global Foundries (GFS)||-8.80%||$59.52|
|Wolf speed (WOLF)||-8.10%||$111.30|
|Citrix systems (CTXS)||5.50%||$103.70|
|A Semiconductor (A)||0.50%||$70.55|
|SolarEdge Technologies (SEDG)||11.20%||$314.16|
|Fleetcor Technologies (FLT)||-7.50%||$213.80|
Obviously, some of these tech stocks, particularly some of the bigger names, are way down this year. Some are only slightly down, and some are even up year-to-date. So what makes these stocks attractive buys now? That’s how it breaks down.
The CHIPS and Science Act of 2022 was passed to encourage companies to manufacture microprocessors in the United States and reduce US companies’ reliance on foreign manufacturers for these tiny silicon chips, which are used in everything from washing machines to smartphones to cars to be built in.
Companies likely to benefit from this law include Micron Technology, GlobalFoundries, Wolfspeed and ON Semiconductor. Micron Technology just announced plans for a new $15 billion factory in Idaho. GlobalFoundries is a contract chipmaker that can expect more orders not only because of the CHIPS law, but also because of the current chip backlog. Wolfspeed has already announced plans to build a new manufacturing facility in North Carolina to manufacture the raw materials that go into chips for electric vehicles and other applications. ON Semiconductor manufactures semiconductors for automotive, industrial, medical, aerospace, 5G and Internet of Things applications.
Cloud computing, energy and fintech
These are players in industries that were on the rise before the pandemic and, despite some setbacks this year, are poised to continue their recent uptrend.
SolarEdge provides smart energy technology to capitalize on the renewable energy trend. Citrix Systems is a cloud computing company that continues to capitalize on the rise of remote working and the need for businesses to provide flexible access to their computing systems. Fiserv provides fintech and payment processing technology to companies worldwide. FleetCor Technologies automates and digitizes business payments and employee purchases, making it easier for organizations to stay on top of their spending.
Some tech stocks don’t need an explanation. While the days when these companies’ IPOs made millionaires or billionaires overnight are over, companies like IBM, Amazon, Alphabet — Google’s parent company — and Apple continue to deliver long-term returns for investors. While some of these companies have declined significantly since early 2022, it could be time for a rally for some of these tech titans. Industry analysts still hold these stocks in high esteem, and it’s hard to dispute their past success.
Can’t decide which tech stocks to add to your portfolio? Consider the Technology Select Sector SPDR Fund ETF (XLK), which tracks the index of technology stocks in the S&P 500. This exchange traded fund gives you the opportunity to participate in future upsides in the technology sector while diversifying so that one bad decision doesn’t kill your portfolio.
Technology stocks may not be the high achievers they once were, but they can be solid long-term investments. The products and services they offer keep businesses running and have become irreplaceable in our personal lives. Companies in this sector will continue to innovate and their stocks should deliver solid returns over the long term.
Information is correct as of September 8, 2022.
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