Technology stocks have taken a hit this year. Many individual investors have used it as an opportunity to double up.
The Nasdaq Composite Index — home of the big tech stocks that fueled the market’s decades-long rally — is down 21% in 2022. Shares of Amazon.com Inc. AMZN 10.36% and parent companies Google and Facebook META – 1.01% suffered doubly. Digit is also falling, stung by higher interest rates and sour attitudes about its growth prospects.
Still, many of these stocks remain the most popular among retail investors, who say they are confident of a recovery and expect the companies to continue driving the economy.
According to data from Vanda Research, retail investor purchases of a basket of popular tech stocks hit their highest level since at least 2014 in late July. The basket includes FAANG shares – Facebook parent Meta Platforms Inc., Amazon, Apple Inc. AAPL 3.28%, Netflix Inc. and Google parent Alphabet Inc. GOOG 1.79% — along with a handful of others like Tesla Inc. and Microsoft Corp.
Meanwhile, Apple, chip company Advanced Micro Devices Inc. and tech-heavy exchange-traded fund Invesco QQQ Trust have been among the most popular single bets for 2020.
Interest in risky and leveraged funds that invest in technology and stocks like Nvidia Corp. is also up, a sign that investors have jumped in to take advantage of wild swings in stocks.
For many, it was a fruitful wager. Tech stocks have rallied lately, in part on investor hopes for a slower pace of rate hikes in the coming months. The Nasdaq gained 12% in July, its best month since April 2020, outperforming the broader S&P 500, which rose 9.1%.
Individual investor Jerry Lee says, “The market grossly underestimates how much technology can actually pour into our lives.”
Photo: Peggy Chen
“I’m extremely optimistic about technology,” says Jerry Lee, a 27-year-old New York investor who co-founded a startup that helps people find jobs. “The market grossly underestimates how much technology can actually flow into our lives.”
In the coming days, investors will be analyzing earnings reports from the likes of AMD and PayPal Holdings Inc. for more clues as to where the market is headed. Data on manufacturing and the labor market are also available.
Mr Lee said he recently put money into a tech-focused fund that counts Apple and Nvidia among its largest holdings, after years of investing in broad-based index funds. His experience working at companies like Google has made him optimistic about the future of the sector, he said.
Gabe Fisher owns shares in Meta Platforms, Amazon and Alphabet.
Photo: Ethan Kaplan
Even last week, when many industry leaders including Apple, Amazon and Alphabet warned their growth was slowing, investors pushed stocks higher, expressing confidence in the companies’ ability to weather an uncertain economy. Apple posted its best month since August 2020, while Amazon ended its best month since October 2009, helped by a 10% rise in its shares on Friday alone.
Many investors also rushed to see the slump in shares of Facebook parent company Meta Platforms. The stock was the top buy among retail investors on Thursday at brokerage Fidelity, as it fell 5.2% on the social media giant’s first-ever revenue decline. Tesla, Ford Motor Co. and leveraged exchange-traded funds, which track the tech-heavy Nasdaq 100 index, also traded frequently on the day.
Gabe Fisher, a 23-year-old investor based near San Francisco, said he’s sticking with stocks like Meta, Amazon and Alphabet.
“Even if these companies never grow that fast, they’re still companies that are relevant enough and have enough adoption that I’m going to stick with them,” said Mr. Fisher.
He said he also has a small position in Cathie Wood’s ARK Innovation Exchange-Traded Fund, which he doesn’t plan to sell anytime soon, even though the fund has lost more than half of its value this year.
Other investors have turned to riskier corners of the market. Leveraged Exchange Traded Funds Tracking Tech were the third and fourth most popular ETFs bought by retail investors this year, behind funds tracking the S&P 500 and Nasdaq-100 indices. These funds allow investors to turbo bet the market, doubling or tripling the daily return of a stock or index.
Many retail investors have also turned to the options market to bet on technology. Bullish bets, which would pay off if Tesla stock goes up, are among the most commonly traded in the options market, according to Vanda. According to Vanda, on an average day this year, individual traders have spent more on Tesla call options than Amazon, Nvidia and options tied to the Invesco QQQ Trust combined. The company analyzed the average premium spent on options that are out of the money or far from where the stocks are currently trading.
Jeff Durbin, a 59-year-old investor from Naples, Fla., said he regrets missing out on buying big tech stocks decades ago.
He’s bought up stocks of companies like Upstart Holdings Inc., an artificial intelligence company, and Shopify Inc. SHOP -3.01% — and held on despite their wild swings. Shopify, for example, fell 14% in a single session last week as it said it would shed about 10% of its global workforce. “It’s painful, but I missed things like Amazon and Netflix when they were cheap,” Mr Durbin said. “Who will be Amazon and Apple in 20 years?”
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