Big Tech Stampedes Higher This Earnings Season

The world post-pandemic will be much different from the world before it.

I’ve been preaching that an evolution is underway. And I’ve urged investors to recognize this.

I see COVID-19 as a tipping point for accelerated adoption of all kinds of emerging technologies.

Especially ones that will be fixtures in our new normal.

And that’s why Big Tech is standing strong right now.

Big Tech Stampedes Higher

Over the past month, Big Tech has been on a stampede.

The Nasdaq has thundered 20% higher.

And tech stocks are now down only a little more than 1% for the year!
Nasdaq Composite vs Dow JonesTake a moment to appreciate the massive shift in sentiment that took place recently.

April was the best month for the markets in more than 30 years.

And a lot of fuel for that run was provided by tech. Not only are we seeing technology demand rebound more rapidly than demand in other sectors, but we’re seeing it drive higher at an accelerated pace.

This has been echoed again and again during conference calls this earnings season.

With no physical stores open, e-commerce sales are trouncing expectations.

For the first quarter, Amazon (Nasdaq: AMZN) beat revenue expectations at $75.5 billion. And net sales for the second quarter are expected to hit $78 billion at the midline – representing double-digit growth.

Meanwhile, demand for the cloud is soaring.

For example, Amazon Web Services – the company’s cloud computing platform – reported revenue topped $10 billion for the first time.

And Microsoft‘s (Nasdaq: MSFT) Azure – its own cloud offering – also boosted first quarter earnings. Revenue for the company increased 14% overall. While gross margin increased 18%, including a 4% improvement specifically from Azure.

Additionally, the workplace is moving from in person to online. This has been extremely profitable for work-from-home plays like Zoom Video Communications (Nasdaq: ZM) and Slack Technologies (NYSE: WORK).

Zoom is up an impressive 145.3% year to date, while Slack is up 38.6%.

Picking Up Speed

Those who need more confidence in Big Tech’s rebound merely have to look at what’s transpiring in China.

For instance, sales of smartphones in China plummeted 22% during the first quarter.

Not surprisingly, this was the largest decline ever.

And February was an excruciatingly painful month as sales cratered 35%.

But thanks to the shift from brick-and-mortar spending to e-commerce, the decline was nowhere near as steep as expected. And online sales accounted for half of all Chinese smartphone sales in the quarter. That was an increase of 30% from last year.

Consumer spending has also picked up speed with the reopening of China’s economy.

Apple increased its smartphone shipments threefold from February to March. And Chinese smartphone maker Xiaomi Corp. stated the market has already recovered to 80% of normal levels.

Our New Normal

All of this demonstrates that the rally on the Nasdaq is not unwarranted. It’s a reflection of the realities tech stocks are enjoying.

This is our new normal.

We are now in a world that may be forever changed. But technology is and will be the biggest winner.

Here’s to high returns,

Matthew