Stock Market: Are We In A Massive Tech Bubble?

(Drivebycuriosity) - "The technology sector is in a massive bubble", claims "Business Insider", an online magazine (businessinsider). They compare this year´s Internet stock rally (year-to-date: Amazon.com plus 41%, Google plus 44%, Yahoo plus 65%, Facebook plus 84%, Yelp plus 250%, Netflix plus 260%) with the dot-com boom of 1999 which was followed by a crash  2000 and 2001.

I don`t agree. There are at least 3 reasons that the technology sector - especially Internet companies - is in a much better shape than at the turn of the century:

1. Consumers love smartphones, tablets, e-book readers, game consoles and other high tech devices. Those gadgets, which didn´t even exist in the year 2000, are rapidly getting better and more alluring thanks to new apps and other software. Many digital devices can be used to access the Internet which leads to the mobilization of the World Wide Net. This raises the number of its frequent users sharply - and not just in the industrialized countries. The number of global Internet users exploded from 248 millions in December 1999 to 2,7 billion last March (internetworldstats).
 
Thanks to this easy access people worldwide are spending much more time and money on the Internet for E-commerce and other services. Millions of people are using Internet and other incarnations of software to organize shopping, leisure time, traveling, dating, eating out and more.

Therefore online shops, search provider, social networks and a lot of other Internet based services are growing fast. Simultaneously there is a thriving demand for devices & software that enable the burgeoning data streams (chips, server, router, transmitters, satellites and more).

But not alone the Internet is growing exponentially! Technology in general is getting more and more important for our every day life. Chips & software are increasingly used for entertainment, communication, security, controlling room conditions, monitoring cars, steering household appliances and a lot of medical purposes.

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2. Companies have to invest into Internet and other hard- and software technologies to adapt to a rapidly evolving world. They will use more technology to reduce costs (for instance via robotics and other forms of automatization) and to process a deluge of data to respond to competitors and to exploit chances on global markets.

3. In a slow growth economy many investors are searching for fast growing companies. They will find them in the tech sector, especially with Internet companies  (revenue growth from a year ago: Google 22%, Netflix 22%, Amazon.com 24%, Facebook 60%).

I reckon that we are still in the beginning of a new technological revolution which - in combination with the catching up process in China, India and other Emerging Markets - will keep the tech rally alive for years to come.

Disclosure: I am an investor in Amazon.com, none of the others mentioned.