Why Tech Stocks Will Continue to Thrive Despite the Sell-Off

We've been sticking to our tech stocks through the recent market turbulence, and you might wonder why we're not bailing out. To understand our strategy, let's take a closer look at the underlying trends driving the tech sector. While many have fled the usual suspects, we believe that the secular growth stories will continue to shine. One such story is the insatiable demand for data centers to support artificial intelligence. Oracle's Larry Ellison, no stranger to successful ventures, predicts that his company will need 1,000 to 2,000 data centers in the near future. With that kind of demand, it's hard to bet against Ellison. But what about the skeptics who claim that the spending on data centers is overblown? We think these companies, including hyperscalers like Alphabet, Microsoft, Amazon, and Meta Platforms, as well as those that benefit from this spend, such as Nvidia, Apple, Broadcom, Advanced Micro Devices, and to a lesser extent, Dover and Eaton, are getting it right. Our central tenet is that the spending makes sense and will continue.

So, why are we so convinced? The answer lies in Microsoft's Bing, which was once a major rival to Google. Google's decision to spend heavily, locking up the search market, is a pivotal moment in history. The legacy of this decision is two-fold: first, no one will ever catch up with Google on search; and second, no one will ever again allow themselves to be "Bing-ed" in this AI moment by underinvesting. This fear of being left behind is what drives so much investment in the tech sector. There may be questions about just how much investment is necessary to play in this field. Oracle suggests it's $100 billion per company. We think that you have these incredible revenue streams from the richest companies on earth, and they aren't going to stop spending any time soon.

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