Investment Institute

Technology stocks: Long-term trends present compelling opportunities

  • 22 March 2023 (5 min read)

Following a stellar period for technology stocks during the COVID-19 crisis, a series of headwinds conspired in 2022 to bring the tech sector back down to earth. During the pandemic, as greater interconnectivity became more essential, technology helped us shift to a “new normal;” in the wake of this environment, the tech-heavy Nasdaq-100 index delivered a significant 47.6% in 20201 – with hefty gains achieved again during 2021.  

In the aftermath of Russia’s Ukraine invasion, however, the surging tech sector began to pullback, inflation hit multi-decade highs, and monetary policy rapidly tightened. As a result, equity investors in their droves swiftly switched from Growth to Value stocks. Consequently, the Nasdaq-100 finished 2022 33% lower year-over-year2 .

And yet, within this landscape, we believe this course correction leaves tech stocks in a far more compelling position – in fact, with robust long-term growth drivers still very much in.

Signs of recovery already underway

While we can expect volatility to continue over the short-term, 2023 has brought with it a renewed sense of positivity among global investors. Inflation is moderating, and it is widely expected the US Federal Reserve will soon ease back on the pace of its interest rate hikes – both of which should improve the outlook for corporate profit margins. Many of last year’s laggards, including technology stocks, have already enjoyed a strong year-to-date rebound. The Nasdaq tellingly posted its best January performance for 2023 since 2001, delivering a 10.6% return on the month, pointing to a growing bullish outlook.3

In any case, when it comes to tech shares, valuations are, of course, only part of the story. While valuation remains the basis for finding an attractive entry point, the key for long-term, fundamentally inclined investors is to identify quality and sustainable growth. With that view, we believe investors can be positioned to capitalize on a plethora of long-term opportunities across the technology space.

Key drivers of future growth

When technology is ready to be rolled out and commercially deployed, in some cases, it can often address a far larger market than initially anticipated. Remember: the evolution of SaaS and as-a-service offerings means many technology companies now go beyond simply selling hardware and software. Operating under expanded business models enables these innovative tech firms to provide a larger set of revenue-driving services and tap into new streams of income.

Tech continues to evolve in ways that few could have predicted 20 years ago. Examples abound. Amazon, initially an online book seller, purchased Hollywood giant and owner of the James Bond franchise MGM for $8.45bn.4 A company like Alphabet (Google) has been public since 2004, but it is still growing and in many ways is still growing like a start-up. Constant disruption and upward innovation, herein lie the basis of the tech sectors’ bright future.

We, therefore, believe there are several key drivers underpinning potential long-term growth in the technology sector and want to highlight a few primary catalysts below:

Cloud computer and infrastructure spending

Cloud computing is the delivery of computing as a service rather than a product. Spending on compute and storage infrastructure products for cloud deployments, including dedicated (private cloud) and shared IT environments (public cloud), increased 24.7% year-on-year in the third quarter of 2022 (3Q22) to $23.9bn.5

For the full year 2022, cloud infrastructure spending is forecasted to grow 19.6% year-over-year, to $88.1bn.6 Coupled with an improving infrastructure supply chain, the market continues to benefit from high demand and large backlogs. Longer term, given an expected compound annual growth rate (CAGR) of 12.9% over the 2021-2026 forecast period, spending on cloud infrastructure is estimated to reach $135.1bn in 2026.7   Cloud computing is enabling new business models to scale quickly with efficiency. As mentioned, with many technology firms no longer just selling hardware and software, subscription services (e.g., Amazon Music, Microsoft Xbox Live, Apple TV, and Google Play) now rely on cloud computing to generate regular income streams. Given the ability for cloud computing to be deployed in a variety of capacities, public cloud services are forecasted to grow 20.7% in 2023 to almost $600bn.8

Digital transformation

Digital transformation is the process by which companies embed technology across their businesses. By adopting a digital-first mindset and embracing digital transformation, enterprises can unlock a myriad of operational benefits, optimize efficiencies, and improve business dynamics. In an increasingly digital business climate, digital transformation enables companies to directly compete against digitally native businesses – that is, companies that were built to primarily operate online – for customers and employees.  Each company that walks down the path of digital transformation might take a different route – one that naturally becomes tailored according to a business’s specific workflows, customer experience, and core value proposition(s). However, look closely, and you’ll notice that companies embracing the push to digital share a number of common objectives. The digitalization of data, software-as-a-service (SaaS), analytics and artificial intelligence, and cybersecurity all support a long-term opportunity for investors

Digital transformation’s dramatic breakthrough can be seen across a variety of industries. Take retail banking: if institutions offering financial services seek to attract the next generation of customers to address their banking needs, the simple provision of a mobile banking app is no longer a nice-to-have but instead a must-have. Governments around the world are similarly seeing the benefits of introducing more digitally based, self-service processes across a variety of tasks. 

The rise of 5G

The emergence of 4G networks during the last decade-plus drove both the adoption of the smartphone, as well as the proliferation of new applications such as social media, video communications, gaming, digital payments, etc. While 4G turned out to be a notable upgrade to its 3G predecessor, 5G has been engineered to be optimized for a data-centric network, rather than a voice-centric network with a data overlay. By significantly enhancing telecom operators’ ability to administer their spectrum more efficiently, the transition to 5G figures to unlock new revenue opportunities.

We believe that 5G will be the key technology to constructing a more connected world, producing material ramifications for a wide variety of end markets such as transport, manufacturing, entertainment, and healthcare. According to PWC, the key functional drivers of 5G have the potential to unlock a broad range of opportunities, including the optimization of service delivery, decision-making, and end-user experience.9 The 5G global value chain, alone, projects to create more than 22.3m jobs and generate $13.2trn in global economic value by 2035. At current, we believe the most interesting investment opportunities, as it specifically relates to the 5G space, lie with communications, infrastructure, and semiconductor providers.10


As the world relies more and more on semiconductors to power more and more electronics, we expect the rise in global demand to be a development defining the next chapter of the technology revolution. While most of the world's silicon chips were once used in computing-related devices, the demand for semiconductors has exploded over the past decade into several markets such as smartphones, tablets, consumer electronics, the Internet of Things (IoT), and now, the automotive industry. Although global PC shipments declined by 16.2% in 2022, worldwide semiconductor revenue increased 1.1% – a dichotomous phenomenon that would not have occurred 15 years ago.11

In response to global semiconductor production shortages12 , recently passed government initiatives such as the European Chips Act and the US Chips Act – the latter has signed into law the intention to spend $280 billion into the industry over the next 10 years – reinforce how critical the semiconductor industry remains to the global economy.


The advent of hybrid and remote work has placed cybersecurity further into the spotlight, as more people work from home and more business is conducted online. The volume of sophisticated cyberattacks, such as ransomware, phishing, and IP and data theft reached new heights during the global economic downturn. In this climate, with more companies moving to cloud-based computing and the costs related to cybercrime projecting to reach $10.5 trillion a year by 2025,13 it’s no surprise that cyber security specialists are profiting from “unprecedented demand.”

Companies face an increasing number of complex threats when it comes to safeguarding business-critical systems and consumer data. With so much at stake for enterprises and investors alike, we continue to expect robust spending around cybersecurity. Firewalls, email protection, cloud-based security, and vulnerability management are just a few important subplots to monitor surrounding cybersecurity moving forward.

An abundance of opportunities

Technology influencing society and corporate strategy is nothing new. The pace of adoption by both consumers and industries, which has never been faster than it is now, is new and underlines a high degree of long-term growth potential. During times of extended volatility, it becomes essential to drill deeper into the information that lets you fundamentally analyze the quality of that growth, its sustainability, and the leverage a business can deliver.

Remember: The situation today is a far cry from the backdrop at the turn of the century when prices soared leading up to the dotcom crash. In 1999, many technology firms were enjoying unsustainable growth and being rewarded with sky-high valuations which, given their lack of both revenues and customers, resembled anything but fair market value.

We can contrast that period with the landscape today, where technology firms now maintain very real revenues, profits, and clients. Today’s market leaders are more resilient, enjoy more stable cash flow generation, and have the potential to drive further investor upside by unlocking untapped markets and opportunities.

When COVID-19 first hit, several elements of tech spending exponentially accelerated. Operational costs piled up as businesses adjusted to new ways of working. Companies have adjusted to a new environment predicated on digitalization, and with that, longer-term projects that were put aside or on hold are now coming back online. Given this state of play, in our view, the technology sector remains rife with opportunities for the long-term investor.


  • RmFjdHNldCwgZGF0YSBhcyBhdCAzMS8xMi8yMDIwLCBVU0QgdGVybXM=
  • RmFjdHNldCwgZGF0YSBhcyBhdCAzMS8xMi8yMDIyLCBVU0QgdGVybXM=
  • RmFjdHNldCwgZGF0YSBhcyBhdCAzMS8xMi8yMDIzLCBVU0QgdGVybXM=
  • QkJDIE5ld3MgKDUvMjYvMjAyMSk6IEFtYXpvbiBidXlzIEhvbGx5d29vZCBzdHVkaW8gTUdNIGZvciAkOC40NWJu
  • SW50ZXJuYXRpb25hbCBEYXRhIENvcnBvcmF0aW9uIChJREMpICgxLzIwMjMpOiBXb3JsZHdpZGUgUXVhcnRlcmx5IEVudGVycHJpc2UgSW5mcmFzdHJ1Y3R1cmUgVHJhY2tlcjogQnV5ZXIgYW5kIENsb3VkIERlcGxveW1lbnQ=
  • SW50ZXJuYXRpb25hbCBEYXRhIENvcnBvcmF0aW9uIChJREMpICgxLzIwMjMpOiBXb3JsZHdpZGUgUXVhcnRlcmx5IEVudGVycHJpc2UgSW5mcmFzdHJ1Y3R1cmUgVHJhY2tlcjogQnV5ZXIgYW5kIENsb3VkIERlcGxveW1lbnQ=
  • SW50ZXJuYXRpb25hbCBEYXRhIENvcnBvcmF0aW9uIChJREMpICgxLzIwMjMpOiBXb3JsZHdpZGUgUXVhcnRlcmx5IEVudGVycHJpc2UgSW5mcmFzdHJ1Y3R1cmUgVHJhY2tlcjogQnV5ZXIgYW5kIENsb3VkIERlcGxveW1lbnQ=
  • R2FydG5lciAoMTAvMzEvMjAyMik6IEdhcnRuZXIgRm9yZWNhc3RzIFdvcmxkd2lkZSBQdWJsaWMgQ2xvdWQgRW5kLVVzZXIgU3BlbmRpbmcgdG8gUmVhY2ggTmVhcmx5ICQ2MDAgQmlsbGlvbiBpbiAyMDIz
  • R2FydG5lciAoMS8xNy8yMDIzKTogR2FydG5lciBTYXlzIFdvcmxkd2lkZSBTZW1pY29uZHVjdG9yIFJldmVudWUgR3JldyAxLjElIGluIDIwMjI=
  • R2FydG5lciAoMS8xNy8yMDIzKTogR2FydG5lciBTYXlzIFdvcmxkd2lkZSBTZW1pY29uZHVjdG9yIFJldmVudWUgR3JldyAxLjElIGluIDIwMjI=
  • TWNLaW5zZXkgKDMvMTAvMjAyMik6IEN5YmVyc2VjdXJpdHkgdHJlbmRzOiBMb29raW5nIG92ZXIgdGhlIGhvcml6b24=

Related Articles


Innovation in personal health technology signals investment opportunities

  • by AXA Investment Managers
  • 20 May 2024 (5 min read)

Nasdaq-100 Index® - Beyond technology?

  • by AXA Investment Managers
  • 29 March 2024 (5 min read)

Tech stocks look set to potentially continue AI-led hot streak

  • by Chris Iggo
  • 05 March 2024 (7 min read)


    Not for Retail distribution: this document is intended exclusively for Professional, Institutional, Qualified or Wholesale Investors / Clients, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.  

    This document is being provided for informational purposes only.  The information contained herein is confidential and is intended solely for the person to which it has been delivered.  It may not be reproduced or transmitted, in whole or in part, by any means, to third parties without the prior consent of the AXA Investment Managers, Inc. (the “Adviser”).  This communication does not constitute on the part of AXA Investment Managers a solicitation or investment, legal or tax advice.   Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision. 

    © 2023 AXA Investment Managers. All rights reserved 

    Are you an IFA or other Professional Investor ?

    Are you a financial advisor, institutional, or other professional investor?

    This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.