Unlike most industries, tech managed to not only shake the impact of the pandemic but thrive under it. Runaway initial public offerings like that of Airbnb and DoorDash capped off a year that demonstrated the western worldâ€™s reliance on companies like Amazon and Zoom.
â€œLast year the capital gains in US technology shares dominated returns while other sectors were left lagging,â€� says Simon Edelsten, a fund manager at British investment group Artemis.Â
â€œSuch a concentrated market can lead to investors running winners regardless of valuation and a bubble forming.â€�
Edelsten says that some of the highest-profile techÂ companies now had valuations that were â€œdifficult to justifyâ€� in terms of their potential to make considerable profits over the long term.
â€œHowever, we live in a period of extraordinary advances in technology accelerating growth prospects across a range of industries where valuations are less stretched,â€� he says.
A slew of new apps that allow people to buy and sell stocks has also led to a raft of new investors pouring into the sector. Programs like eToro and Robinhood have opened markets up to a whole new audience of people looking to invest their savings to beat inflation.
â€œThe growth of online apps, a more affluent middle class, and an awful lot of money thatâ€™s not earning anything, is going into areas of the market that it probably wouldnâ€™t be going into if we werenâ€™t in this kind of situation,â€� says Michael Hewson, chief markets analyst at CMC Markets, of the rise of retail investors during the pandemic.
Hewson says he canâ€™t â€œhelp the feeling that there is a certain element of a bubbleâ€�.
Edelston agrees, insisting there were new ways for â€œless experienced individuals to investâ€� and that it encouraged â€œcrowd behaviourâ€�.
The wave of new retail investors has also helped Bitcoin reach record highs this year. Over the past month Bitcoinâ€™s average trade volume stood at $39.1bn –Â more than the volumes at Apple, Microsoft, Amazon, Facebook, and Alphabet combined.
Bitcoin crossed $40,000 in value for the first time in its existence on Thursday with the market capitalisation of the currency now at around $760bn.
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