In March 2000, the dot-com bubble burst and overvalued tech stocks ended up dropping nearly 80%. Like the Internet era, the stock market boom, which started in 2009 and gained momentum during the pandemic, was fueled in large part by very low or non-existent interest rates, which encouraged investors to take a greater interest in companies that promised exceptional returns.

And just like in the dot-com era, companies have promised products and results they can't deliver, but unlike then, most of the most valuable publicly traded technology companies today are real businesses - they make and sell products that people value, and generally make a profit. Just because some of the tech behemoths like Apple (-17.55%), Microsoft (-21.06%), Google (-20.82%) or Amazon (-29.63%) are down over the past 6 months doesn't mean they're going to disappear.

Source: MarketScreener Stock Heatmap, Performance 6-month, S&P500

 

Instead, it just means that investors no longer think their growth prospects are as strong as they once did. The tech sector's decline is illustrated by the NDXT, the index of the 100 largest technology companies on the NASDAQ stock exchange, which has fallen by a third since its peak in early November. The companies in this index have lost a total of $2.8 trillion in market value, as evidenced by Robinhood's stock falling 76.16% since its IPO. Other high-potential technology stocks, backed by investment funds and companies, did not beat the market and saw their prices collapse, such as Rivian Automotive, down 77% since its introduction.

At the same time, the covid-19 crisis has allowed the crypto-currency market to explode, which today is down 57.54% with its November 2021 ATH. The largest crypto, Bitcoin, was trading at $68,000 on that date and $30,488 today, a 55.16% drop. The even more speculative NFTs (non-fungible tokens) have not withstood this decline and their sales have fallen by almost 80% since November.

The technology sector is the only sector that can produce such a craze that millions of independent investors decide to jump in. It has been the cause of many stock market crashes throughout time and history is repeating itself during the Covid-19 crisis, where it is the sector that is both the most down and the most up.

Source: CoinMarket Cap, Total Cryptocurrency Market Cap

 

And let's not forget the rise in interest rates. In addition to triggering a recession, it reduces the present value of earnings for technology companies, most of which are far into the future (for example Netflix had a P/E of 78.3x in 2019 and expects to stabilize at 18.5x by 2022 and Google had a P/E of 27.2x in 2019 and expects a P/E of 20.9x by 2022). If inflation does not come down, central banks will increase rate hikes, which will put more pressure on risky technology stocks.

The demographic, geopolitical and environmental situation is extremely delicate. After the Covid-19 crisis, which has further intensified the inequalities of wealth in the world, new lockdowns are taking place, harming the various production and supply chains. The outbreak of war in Ukraine has caused significant food shortages involving other countries, sometimes the world's leading supplier (such as India and Ukraine with wheat for example). All these tensions are motivating investors to leave the so-called "risky" stocks, which are too volatile and too exposed, for stocks with less exposure but with equally interesting growth potential. From this perspective, global warming and access to energy resources have pushed countries around the world to intensify their investments (the Senate has released 1.2 billion dollars for clean energy) in the energy sector. This means that countries no longer wish to be predominantly dependent on another (when possible) and therefore favor "national" production. Thus, energy is the sector that has most "benefited" from the current situation, allowing it to grow exponentially by 54.75% over the last six months.

Source:TradingView, US Stock Market, performance by sector

Will the tech sector lose its place as the undisputed star of markets, replaced by the energy sector?

Thanks to its defensive qualities, the energy sector will always appeal more to investors in difficult times, but tech will remain their preferred option when times are good. The energy sector, under the pressure of economic and socio-environmental issues, combined with the entry in force of information technologies, will have much larger market shares than currently, and the 2030-2050 horizon will be under the influence of energy. Technology will always be present in our lives as the gateway to development and innovation, but its use will be different from the current one. Energy will be the sector that benefit the most from the development of technology, allowing it to provide answers to major problems such as energy storage.

New technologies will benefit consumers, who will be able to produce electricity on peer-to-peer platforms with blockchain technology, or to choose their energy source from identified and localized production assets. Decentralized tools will offer answers to the need for increased flexibility and emerging countries, lacking a central grid, which will then will benefit from electrification based on "microgrids" connected to each other. Both sectors complement each other and are both set to really appeal to investors in the future.