Stock Market: Unjustified Punishment

(Drivebycuriosity) - Technology stocks are under pressure. The Nasdaq 100, which represents the leading US technology stocks, dropped today 1.3% and lost about 3% since last Wednesday.  The whole technology sector gets punished for disappointing user numbers at Facebook (minus 20% since Wednesday) and Twitter (minus 30%).

I reckon that the punishment is unjustified. The problems at Facebook & Twitter are company specific. Facebook has been miss-treating her customers by selling their data. It seems that Facebook users are finally responding to Zuckerberg`s arrogance. And Twitter deleted a million accounts of fake users.

But the rest of the tech sector is doing quite well as the ongoing earnings season (company reports for the second quarter 2018) shows. The Tech sector companies in the S&P 500 are up +35.3% from the same period last year on +12% higher revenues, with 90% beating EPS estimates and 87.1% revenue estimates (zacks). Even without the favorable effect of Trump`s tax cuts tax earnings are growing 20% plus.

The earnings rise will continue in the coming years. Technology companies like Google, Microsoft & Amazon became money machines because they are riding the new industrial revolution. The Internet increases the flow of information and reduces the cost of data. New ideas can spread faster, encouraging discoveries and inventions and boost the technological progress. Businesses run smoother thanks to Internet generated networks. Internet, cloud computing, artificial intelligence, e-commerce and other incarnations of the software revolution are making the whole world more efficient, reducing costs and are creating new markets. I think the recent tech beating will soon be forgotten.