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Tech Sector Insights with Ivana Deesa
Jun 24, 2024
Lecture Notes: Tech Sector Insights with Ivana Deesa
Key Topics Covered
Current leading companies: Microsoft, Nvidia, Apple
Market trends and predictions for megacap and midcap stocks
Valuation insights in the tech sector
Midcap software stocks
Impact of interest rates
Cyber security and future investments
Mega cap vs. Midcap Stocks
Mega cap companies
: Microsoft, Nvidia, Apple
Currently leading the market in terms of valuation.
Megacaps drove the first leg of the market upturn this year.
Midcap stocks
:
Expected to perform better in the second half of the year.
Especially looking at opportunities in the software space.
Valuations in midcap software stocks are still at reasonable levels compared to mega caps.
Valuation Trends
Mega caps
: Valuations have expanded.
The recovery driven mostly by earnings is now seeing some valuation expansion.
Midcaps
:
Valuations are close to bottom levels seen during interest rate spikes in 2020 and 2022.
Stocks in the software space have depressed valuations and are lagging behind semiconductors.
Software Sector Insights
Investment follows a cyclical pattern:
Hardware investment
: First phase after a downturn.
Application investment
: Follows hardware; includes software tools and applications.
Interest rates
:
Need to stabilize for positive investment impact in software stocks.
Key interest rate benchmark: 10-year yield needs to stop rising.
Investment Focus Areas
Cyber Security
:
Fundamental importance due to increasing cyber attacks and ransomware incidents.
Exciting area for current investment.
Long-term Focus
:
Infrastructure level: Cyber security and data infrastructure over the next year.
Application layer: Public-facing applications to be considered further down the line (3-year outlook).
Examples: CRM systems, Salesforce optimization tools, Tesla's autonomous driving.
Industry Commentary
Palantir
:
Recently downgraded due to high valuation concerns.
Current focus on hardware investment means delayed impact on software revenue gains.
General AI and Software Tools
:
Gen AI revenue increases have not yet materialized.
Importance of cyber security and data infrastructure as foundational tools for AI advancement.
Conclusion
Near-term investment
: Focus on midcap software and cyber security sectors.
Long-term outlook
: Application layer developments around CRM and AI implementations.
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