Will Tech Stocks Continue Their Rapid Growth?

In a recent Wall Street Journal article, columnist Jason Zweig talks about the growth in tech stocks and the outlook for their continued upward trend.

“At their lows this week,” writes Zweig, “the technology shares that have until recently been the stock market’s darlings—Facebook, Amazon.com, Netflix, Google’s parent company Alphabet and other giants—had fallen more than 17% since March 13. Over the same period, U.S. stocks overall fell 8%.” Although Zweig points out that the recent bad news (such as Facebook’s personal data fiasco) could make matters worse, he wonders whether tech companies may have developed an “unstoppable” business model.

“For today’s leading innovators,” writes Zweig, “growing might not have to mean slowing. Unfettered by the costs of raw materials or the burdens of manufacturing, distribution and advertising, these companies plan decades ahead, rather than fixate on hitting Wall Street’s quarterly earnings targets.”

On the flip side, however, Zweig points out “Of course, history also suggests that every firm that was expected to dominate indefinitely—from RCA in the 1920s to IBM in the 1980s to Nokia in the 1990s—has ended up slipping.”

The article quotes T. Rowe Price’s John Linehan, who argues that as companies grow, “the more scale you have, the less nimble you become,” adding, “I don’t think that’s changed.”