Investors are again interested in high-tech companies

Portfolio managers have again become interested in high-tech companies, including those associated with the introduction of artificial intelligence (AI). This had a positive impact both on the value of shares of technology companies and on the results of management of Russian mutual funds that are oriented towards them. At the same time, such investments require more caution and patience from the investor, since they can both bring a large income and significantly depreciate investments. Market participants see the key risk in a possible tightening of AI regulation.

IT restores trust

A June survey of portfolio managers by Bank of America analysts indicates recent growth in investor demand for high-tech stocks. The global survey included 285 people who managed $764 billion in assets.

According to the survey, 55% of respondents said that the most promising investment in the stock market is investments in high-tech companies. In May, less than a third of the respondents held this opinion. Investors have not been so optimistic since the end of 2020, when, against the backdrop of large-scale monetary stimulus and the Fed’s loose monetary policy, over 80% of managers preferred such investments.

The current interest of investors is promoted by the popularization of artificial intelligence developments.

Since the beginning of the year, many companies (including Apple, Microsoft, Alphabet, Google) have announced plans to introduce AI, which should give a significant boost to their business growth.

“Investors are making the assumption that the rapid development of AI will create a significant increase in demand for chips. As a result, manufacturing companies have been the main beneficiaries of growth since the beginning of the year. The largest companies in the industry were also singled out, which have a large amount of data for processing and training AI, which can create potentially new niches for them,” notes Eduard Kharin, head of the directorate for working with shares of Alfa Capital Management Company.

Insulation technologies

The return of investor interest in the technology sector had a positive impact on its capitalization. On Friday, the S&P 500 Information Technology index updated its all-time high set at the end of 2021, reaching 3085.8 points. Since the beginning of the year, the index has grown by more than 42%. At the same time, the S&P 500 broad market index rose only 15%.

Shares of Russian technology companies are moving in the global trend. Since the beginning of the year, the Moscow Exchange Information Technology Index has grown by almost 39%. Here it is worth considering that this indicator is calculated in rubles, and the Russian currency has weakened its position against the dollar by 20%. However, this result is better than the MOEX index, which has added 30% since the beginning of the year, rising to 2800 points.

Andrey Rusetsky, Managing Director for Investments at PSB Management Company, draws attention to the fact that the Russian stock market is isolated from global markets. This also applies to high-tech companies listed on the Moscow Exchange.

He considers not only good financial results, but also the release of niches in the domestic market due to the departure of foreign competitors, as well as parallel imports through domestic marketplaces, among the factors of outstripping growth in the securities of such companies. “All this is the key to the outstripping growth of this sector, which attracts the attention of investors to this sector,” notes Mr. Rusetsky.

Despite introduced The Bank of Russia limits the purchase of shares of foreign companies from unfriendly countries (from the beginning of the year only qualified investors can buy them), you can participate in the growth of the sector through collective investment products – retail mutual funds. On the Russian market, private investors have access to five open mutual funds and eight exchange-traded mutual funds. In this lineup, there are funds focused on the entire segment of high-tech companies, as well as more specialized funds, for example, investing in semiconductor manufacturers, video game developers, and even artificial intelligence. Since the beginning of the year, such funds have brought income in the amount of 26-57%, taking all the leading places among the most profitable funds since the beginning of the year.

Risk is manageable

At the same time, any industry funds are not only a high potential income, but also high risks. Thus, last year the funds of high-tech companies were among the outsiders and depreciated investments in some cases by 30-60%.

Therefore, investors should be prepared for increased volatility in the technology sector and the risks of remaining in overvalued securities for a long time.

According to Alexander Dorozhkin, head of the share management department at Ingosstrakh-Investments Management Company, “bubbles” tend to deflate against the backdrop of an expected recession in the US economy in early 2024. “If we see the rapid application of these technologies, then the main beneficiary companies may turn out to be slightly sensitive to the decline in the global economy,” Eduard Kharin believes.

However, the rapid development of AI and its penetration into human life may prompt policymakers to tighten regulation. “There may be serious regulatory and legal restrictions that will lead to a slowdown in the implementation of chatbots that can generate text and images in response to requests,” notes Alexander Dorozhkin. Moreover, technologies that change the world do not always work the way they initially seem. Therefore, according to Mr. Dorozhkin, a small share of stocks from the sector related to artificial intelligence can become “rocket fuel for the entire portfolio.”

Vitaly Gaidaev