Investment Project
Introduction
A stock exchange is a central location where the shares of publicly traded companies are simply bought and sold. Traders, investors, and corporate leaders are the major clients in the stock exchange as they are the shareholders. In the US, among the major investment sectors listed in the stock exchange include energy, healthcare, real estate, information technology, communication services, utilities, financials, and consumer discretion (Bloomberg Professional Services, 2020). To evaluate the best and sure investment industry, investors need insights, indicators, and trends in a certain industry’s market dynamics. The rise and fall of an industry in the stock exchange market is influenced by politics, social status, or health standing of the population, security, and the country’s economy. If an investor undertakes to invest in shares of a company whose future projection is not clear in terms of growth, then the investor risks unknown loss. In order to invest in industry and earn profits, investors must be sure of the market waves, and the future prospect of the industry must be promising. This project will analyze the market trends in the information technology sector in the recent past, current, and near future. Consequently, it will offer recommendations to the investors accordingly.
Information technology, in a nutshell, consists of computers, hardware, software, and IT services. A broader view of the industry in business scenarios encompasses trading in the communications equipment Industry, electronic equipment, electrical instruments, IT services industry, semiconductors, semiconductor equipment industry, software industry, technology hardware, and storage technology (Bloomberg Professional Services, 2020). The most recent reports indicate that the information technology industry, through the first quarter of 2020, experienced a growth rate of 275.27% through ten years (The balance, 2020). At the end of the report, it would be clear whether or not investing in this industry would be worthwhile.
Current Trends in Information Technology Markets
Market indicators in the past few years have illustrated that the information technology sector has had an upward growth curve showing tremendous growth compared to most other sectors such as construction and energy. According to a research consultancy firm, the global information technology industry is on track to reach $5.2 trillion by the end of the year 2020 (Comptia, 2020). Out of this, the United States represents about 32% of the total global market, becoming the world’s largest technology market. Nearly half of the US technology market spending is on software and technology services (Comptia, 2020).
The highest growth rate in the market was, however, noticed in the year 2015, 2018, and 2019 as indicated in the global IT industry illustrated below;
FIG 1.1: Global IT industry over the years: Source (Comptia, 2020)
In August 2020, Apple broke the record of becoming the first publicly-traded company to be valued at $2 trillion, thus becoming the leading company in the US information technology market (Hill, 2020). Amazon, Facebook, and Alphabet follow in that order in performance and market share, with all combined worth approximately $6.7 trillion equivalent to over 22% of the total US stock market(Hill, 2020).
Effects of Social Trends on the Information Technology Industry
Technology and innovation are fully dynamic, and everyday tech companies are on the race to come up with new inventions to address the various challenges facing humans and, at the same time, address the fast growing population not only in the US but in the whole world. Waves of innovation build over time, which in turn powers the technology growth engine that appears to be another major step forward (Hill, 2020). Economies, jobs, organizations and personal lives are becoming more and more digital, connected, and automated with time. This will demand more and more advanced technologies outdoing the old ones and finding a very ready market due to the rapid population growth. Technological change in other fields will have to go hand in hand with information technology changes in terms of software and hardware such as advanced microchips, the need for more space in cloud storage, semiconductors, and many more electronic gadgets. This is directly proportional to the growth of information technology in days to come. At the same time, peoples’ lifestyles are changing, and more people are learning and adapting the use of the internet, social media, Google, and Youtube. It means that contemporary the social life of the people solely relies on information technology.
COVID 19 Effects on the Information Technology
Most businesses have suffered through lockdowns with trading restricted. Most sectors and industries have completely closed doors through the pandemic to avoid physical contact. The US is among the most hit; consumers have become even more reliant on the five mega information technology companies for online shopping, communication such as online meetings, connectivity, and more. In fact, looking at the information technology index since December last year, there has been a rising curve amidst the pandemic (Hill, 2020). This clearly shows that the demand for information technology services increases in the wake of a global pandemic. The sector’s growing weight in the index means US market returns now rely even more on the biggest tech companies.