By Rahul Bhutoria

US Technology stocks had a dream run over the last decade (during 2013-2023, NASDAQ, a good representation of the Technology sector, went up by 280%) and more so post-COVID, during which the same index went up by more than 100%.

When everything was hunky dory, 2022 happened, in which inflation soared for multiple reasons, and US Fed hiked interest rates aggressively. Many of the famed and investor-favorite stocks from technology had a great fall that, ranges between 20%-70%.

Here comes the conundrum: is it the right time for investors to relook at investing in US tech stocks?

First of all, it looks evident that the aggressive interest rate hikes done by US Fed in the last 15 months or so have reached a plateau, and the possibility of further rate hikes is very minimal.

Since rising interest rates work like gravity on stock prices, a pause or peaking in interest rates has given markets some relief which shows in stock prices of many US Tech stocks that have now recovered substantially from their lows in the last 1 year.

The way recessionary pressures are building in the US along with a lot of debt that is coming due for repayment for the US government, a section of the market believes that interest rates would possibly find a way to go lower, which bodes well for technology companies.

Many of these companies have been focused on creating value for their shareholders by expanding their offerings in terms of products & services. In the aftermath of the Silicon Valley Bank crisis, Apple announced a savings account in partnership with Goldman Sachs, effectively transforming itself into a Fintech, and it was able to attract almost 1bn$ of deposits in a few days from launch.

For, Microsoft, cloud services now contribute more than half of the revenues for Microsoft, and as the world continues its journey toward digital transformation, the need & demand for cloud services will grow further.

The latest buzzword is Generative AI, and there are companies like Nvidia, which are deeply associated with the developments taking place in AI by being the provider of reliable & fast chips that enhance the abilities of AI.

Lastly, all these companies have underlying businesses that have strong RoEs and generate free cash every quarter, which gives them the ability to have a commanding position, and hence in times of a recessionary overhang, they can use inorganic ways of growth too.

While the companies quoted above are for representation purposes only and shouldn’t be construed as investment advice, the crux is that tech pioneers like these are rightly positioned to capture the opportunities that the changing world is presenting. Technology is here to stay, and its impact on our day-to-day lives is ever-increasing. An investor has substantial merit to allocate to US tech stocks after paying attention to their asset allocation & risk management framework.

(Author is Director and Founder, Valtrust- A bespoke multifamily office)