Fred Razak, Chief Trading Strategist Comments

Johannesburg, 19 June 2023: The world's leading technology giants, Meta and Microsoft, have recently witnessed a significant turnaround in their stock prices. After facing setbacks and plummeting lows due to substantial events and legal challenges, both companies have been recovering, and this month, reached a new high for 2023. Fred Razak, Chief Trading Strategist at CMTrading, analyses this development and its potential impact throughout the year. 

The Rise of Tech Stocks

"These stocks are riding high on the immense potential of artificial intelligence (AI). Although AI has already made its mark in the market, people are starting to realise that its full-scale application will take a few more years to unfold. As this technology continues to evolve, anticipation is building regarding its vast volume and scope," explains Razak.

In addition to Meta and Microsoft, Razak highlights another company, Nvidia, which is deeply invested in AI and plays a crucial role in facilitating the hardware required for its operation. Nvidia is currently experiencing a record-breaking rally, surpassing not only 2023 highs but also reaching all-time highs. Razak emphasises the importance of closely monitoring these peripheral companies that are helping drive the AI revolution.

An Exciting AI Frontier

"This phenomenon reminds me of past events when groundbreaking innovations hit the market. Initially, numerous players enter the scene, but eventually, only one or two companies emerge as industry leaders," Razak remarks. "With the gates wide open, the AI race is on, and companies are vying to become the dominant players. However, we should be aware that there might be major contenders with superior products on the horizon, who may not be among the first movers."

Razak draws a parallel with Google, which wasn't a significant player in the early days of the internet. However, by 2001, they began gaining mainstream recognition, eventually going public in 2004. On the other hand, early pioneers like AOL and Yahoo have become insignificant compared to Google. Currently, the AI landscape resembles the "wild west," presenting an exhilarating environment for technological advancements.

Meta's Decision on the Metaverse

"Meta's recent decision to end the Metaverse reminds me of the Coke and New Coke story of the 1980s and 90s. Like Coca-Cola experienced growth by returning to its classic brand, we might witness a similar effect for Facebook. However, I don't believe ending the Metaverse is the sole driving force behind Facebook's propulsion to new highs," Razak shares.

He suggests that sometimes companies fail to recognise the value of their own products and develop insecurities in the face of competition. Being overwhelmed by platforms like TikTok, Facebook will need to make some adjustments. Nevertheless, with a strong brand and a quality product, they are well-positioned to adapt and thrive.

The Impact of EU Data Transfer Laws

"Technology is evolving at an astonishing pace, leaving little time for us to fully comprehend and process its implications. Legislation and judicial law have struggled to keep up. Consequently, governments often resort to issuing broad statements like 'do not transfer any data across the Atlantic' to exert control," explains Razak. "As technology advances rapidly, these blanket laws become increasingly plausible, necessitating our vigilance."

Tech Stock Predictions for the Remainder of the Year

"A few key factors will shape the future of tech stocks and determine whether the current upward trend will continue. One significant global factor that demands attention is the impact of interest rates and inflation," asserts Razak.

As an experienced trading strategist, Razak acknowledges the inherent difficulty in making precise predictions for Microsoft and Meta for the next six months. However, he observes that the current trend is positive, and as the saying goes, "The trend is your friend until it's not."

Razak draws attention to a compelling parallel between the current market situation and August 2020, when the world was grappling with the depths of the pandemic. At that time, tech stocks were pivotal in driving the entire stock market higher. With that in mind, he expresses hope that history may repeat itself, leading to a resurgence in the tech sector and a continuation of this pattern.

“The outlook for tech stocks remains optimistic, buoyed by the potential of artificial intelligence, the steady growth of companies like Meta and Microsoft, and the emergence of peripheral players such as Nvidia. However, market conditions, global factors, and the evolving landscape of technology will ultimately shape the trajectory of these stocks as we progress through the rest of the year,” concludes Razak.

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CMTrading is the brand name of Global Capital Markets Trading Ltd (A Seychelles company, company no. 104785)