The U.S. stock market witnessed a massive rally last week after the Senate approved the $2-trillion stimulus package on Mar 25 to provide a boost to the economy, which has been hit hard by the coronavirus pandemic. Major U.S. indices — the Dow Jones, the Nasdaq and the S&P 500 — gained 12.8%, 10.3%, and 9.1%, respectively, in the week.
Nevertheless, despite the rally, the major indexes didn’t make up much of the losses incurred from mid-February through the third week of March. The coronavirus-led sell-off during the period has aborted/terminated the 10 years of market expansion which began post the 2007-2009 financial crisis.
The Dow Jones, the Nasdaq and the S&P 500 — all three have lost more than 20% from the respective 52-week highs, pushing the stock market into the bearish territory. Additionally, year-to-date (YTD), the Dow Jones, the Nasdaq and the S&P 500 have depreciated 24.2%, 21.3% and 16.4%, respectively.
Although the U.S. government is coming up with relief packages, the underlying problem, the pandemic, continues to spread its tentacles further, with no signs of waning any time soon. The associated global economic and financial impact doesn’t seem to have peaked yet. Therefore, we expect further turbulence in the coming days.
The coronavirus-led panic selling has taken a toll on the stock market, with just 22 stocks in the S&P 500 or 4.4% of the entire index, registering positive returns in the YTD period. The rest 478 companies are all trading in red, according to data compiled by Barchart.
Of the total 22 S&P 500 stocks that have yielded positive returns so far this year, six are from the Computer and Technology sector.
Tech Sector Weathers Coronavirus Impact
We have observed that though the coronavirus outbreak has thwarted every sector, the U.S. tech sector has been more resilient compared with others. The Technology Select Sector SPDR Fund (XLK) is down 14.2% YTD, while the Energy Select Sector SPDR Fund, the Financial Select Sector SPDR Fund and the Industrial Select Sector SPDR Fund have lost 52.8%, 31.7%, and 27.7%.
The sector’s resiliency can be attributed to the impressive long-term growth prospects of tech companies. The sector remains attractive owing to continuous digital transformations. Rapid adoption of cloud computing, along with ongoing integration of AI and machine learning, has been a major growth driver.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth. Moreover, blockchain, IoT, autonomous vehicles, AR/VR and wearables offer significant growth opportunities.
In addition, the coronavirus outbreak has, surprisingly, opened up newer avenues of growth for semiconductor companies. Shift in consumer preference for Internet-based services, thanks to increasing social distancing, has propelled demand for PCs, notebooks and peripheral accessories. Furthermore, the growing demand for software and hardware that facilitates work-from-home setting is a key catalyst. (Read More: 6 Remote-Working Software Stocks to Ride on Virus-Led Lockdowns)
5 Top-Performing Tech Stocks in Q1
Here we have picked five tech stocks that have positive YTD returns and also have the potential to keep growing in the current global economic scenario.
Also, these stocks carries a Zacks Rank #1 (Strong Buy) or #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Zoom Video Communications, Inc. (ZM - Free Report) stock has soared 123% YTD. This Zacks Rank #2 company is benefiting from evolving workspace demands for seamless enterprise communication tools. Ongoing workspace trends of Bring Your Own Device (BYOD), rise in smartphone penetration and increasing number of mobile workers, are expected to bolster adoption of the company’s enterprise communication solutions.
The 21Vianet Group (VNET - Free Report) stock, which has soared 90% YTD, is gaining from shift in demand trend owing to the coronavirus outbreak. This Zacks #2 Ranked company operates as a carrier-neutral internet data-center services provider in China.
Due to the global lockdown situation, workers and students now need to work and learn from home. The work-and-learn-from home necessity is stoking demand for cloud storage. Furthermore, the lockdown has bolstered the usage of online and e-commerce services globally, thereby driving demand for data-center services.
Cogent Communications Holdings (CCOI - Free Report) is poised to benefit from the rising necessity for work-and-learn-from-home settings amid the coronavirus crisis. This Zacks Rank #2 company offers low-cost high-speed Internet access, private network services and colocation center services. Ongoing digital transformation and rapid adoption of cloud services are key catalysts for long-term growth. The stock has been up up 19.2%, year to date.
CrowdStrike (CRWD - Free Report) carries a Zacks Rank of 2 and has soared 17.9% in the YTD period. As more and more organizations start to work remotely amid the coronavirus crisis, their cybersecurity needs are likely to spike.
Notably, the rising number of work-from-home employees is aggravating security lapses, inducing risks of hacking and phishing scams using coronavirus as content of the subject. Moreover, usage of own devices and equipment that are not properly configured or can be infected with malware during teleworking further raises possible security breaches for enterprises.
NVIDIA (NVDA - Free Report) is a global leader in providing high-performance graphic processing unit or GPU for PCs, notebooks, gaming consoles and data centers. The work-and-learn-from home necessity is driving demand for PCs and cloud-based services, which will benefit NVIDIA.
In addition, this Zacks Rank #2 company’s GPU used for medical research is likely to get a boost owing to the coronavirus outbreak. NVIDIA’s Parabricks tool will be very useful for researchers who are working to combat the current crisis. Through this GPU-accelerated genome analysis toolkit, researchers can accomplish analysis process in just a few hours, which previously took many days.
The stock has gained 7.4%, in the year so far.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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