I’ve only rarely invested in individual tech stocks and currently have (depending on your definition) no individual investments there.
Have made nice $$$ from writing Put options in this space.
And do have exposure from tech being a part of my broader ETF’s.
Still, I believe I need broader exposure… but struggle in my mind with entering the market now due to high risk (again, in my mind) of a major downturn (e.g. AI collapse). Then again, I’ve made that mistake before, e.g.
Late to enter into Google, Apple, etc.
On the other hand… even entering late, still resulted in substantial gains
…so, am left wondering whether others are struggling with this situation and what way out you’ve chosen?
I around 50/50 between global etf and these. Also sometimes I pick some tech stocks. Generally I think we own not enough tech after including real estate, 2nd Pillar and 3rd Pillar.
I agree, am underexposed to tech, it’s just the ‘air’ at these prices which unsettles me.
I may wind up going JEPQ (which is in tech and partially - not the entire portfolio - harvests income with covered calls) so I have upside and downside benefit.
I don’t think the prices of the big tech stocks (apple/google/microsoft/amazon/meta) are too
high. PE ratio is at 30 with 10-15% revenue growth. The biggest risk imo is the lack of IPOs and that causes the tech indexes to stop representing the actual tech sector (openai/anthropic/spacex).
I thought there were quote some (large) IPO’s in the pipeline. Big question mark: from where will funds be allocated towards those stocks - other tech or non-tech?
Isnt covered calls limiting your upside while still bearing full downside risk in exchange for a premium?
Particularly in volatile tech stocks i would advise against a strategy that caps your upside otherwise you might miss und the crazy upwards spikes we have seen just recently..
I question whether we can simply assume the tech sector will continue to grow asymmetrically compared to the rest of the market. High expectations for future cash flows are largely already priced into current valuations. Here is a thought-provoking video on the common fallacies associated with overweighting a specific sector:
While there is an ongoing debate about whether AI is a bubble, I view it as a force capable of completely reshaping our world. But who stands to profit?
The answer isn’t straightforward. There is an old saying: “In a gold rush, sell shovels.” While this makes sense in theory, the logic fails once the market becomes saturated with shovel sellers driving down their own margins. If there really is “gold” to be found—meaning AI exponentially boosts productivity—the “gold diggers” might actually be the biggest winners. Non-tech companies that successfully leverage these new tools could ultimately profit just as much, if not more, than the companies building them.
Therefore, a strong argument can be made against overweighting any single sector, regardless of how promising it currently appears. Ultimately, only time will tell, and the future may very well prove me wrong..
While valuation can be a bubble, I don’t really see usage going down at this point, it’s too much part of many people daily life (or job).
To me the question would be where are the constraint in the production chain (I think silicon is one clear place, the model providers have a lot more competition and by the time they might want to raise margins they likely wouldn’t have moats).
Those who are in the middle of those constraints will benefit the most (I think a lot of the actors in the chip production chain have >50% margins), the question would be how much this is reflected in the valuations already.
Maybe there’s interesting plays with smaller actors around electricity/grid access (e.g. transformers, gas turbine – if you don’t think battery+solar will eventually take over, etc.)
Picking sectors is the same as picking stocks. You increase the variance in outcomes without increasing expected returns. But the change in the outcome distribution is the reason why you do it.
That is why I like semiconductors as a sector. It is a complex global supply chain with very high R&D cost and margins are high (downside is that it is high capex). There is also no possibility of any alternative technology.
Interesting responses. I - for example - placed a bet on SAP figuring that they’re so embedded in customers operational processes that they would be able to generate tremendous opportunities with customers for streamlining these processes with AI. Instead: the stock price went down due (?) fears that SAP itself is easier to ‘copy’ now AI can write code much faster.
I need income from my day to day equity portfolio to life from as I am semi-retired (too young for a pension)
I have my 2nd/3rd pillar more for growth (i.e. additional influx of $$$ into my day to day equity portfolio in 10-15 years)
But I know rationally I should also emphasize growth a bit more in my core equity portfolio. So, rather than seeing it as giving up growth for income, I’m seeing it more as giving up income for growth in my situation
I see, thanks! Wouldn’t it be worthwhile considering doing cc more on assets with less volatility (non-growth) for income and then keep the full growth upside in regular buy and hold approach on e.g. tech securities?
I agree yet SAP is suffering. I actually assumed SAP would benefit big time from lower costs to develop/maintain their own product (I don’t recall the exact quote/link but in Google a HUGE % of coding is now done by AI with actual coders focussing more on oversight). Still, SAP is down.
Yes, I do covered calls on such assets but then you get moderate premiums vs. higher volatile stocks.
I am OK with the moderate premiums to some extent because I almost always do such calls on stocks with high dividend yields (thus stocks I’d like to own anyway at a discount).
I have less of an issue with volatility on growth stocks (as long as they are fundamentally solid companies) as the higher premiums go both ways - i.e. using the wheel strategy of calls/puts is $$$ attractive.
But, i also know I should take a larger position in tech.
Hasn’t it always been a bit expensive? I don’t actually have it in my portfolio just, but had written a longer term put option on it which - as it stands now - may wind up in me having to take delivery (although not any time soon).
Then again, tech is one of those areas where I lack knowledge and I may be best off to just get a basket and let diversification help me out.
(Mature) Tech stocks are good tax wise for swiss residents. Apple/Google buy back around 1-3% of their stock each. So you can just sell 1-3% each year and not pay any income tax or withholding tax and technically still have same economic exposure.
There is a (P/E) multiple contraction happening for software stocks which I think is reasonable and I stopped owning them.
Cost of building software is going down
Building competitors is easier than before
SAP exists because buildling accounting software is expensive. The protection from that entry barrier is getting smaller.
The pricing power and the ability to yearly raise prices by 10-20% is going down
IT budgets got a big new line item with AI spend causing companies to try cut down on existing subsriptions
Companies are shrinking atm causing less revenue due to seat based pricing
The reasons above are why the software multiple is shrinking and I don’t think they will ever trade back at the multiple that they traded at earlier in the decade. Buying them and thinking they will go back up again to previous level is a bit foolish due to the above reasons not disappearing. They will now likely find a bottom at some point at a 10-25 P/E and grow based on their revenue/profit growth over time.
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