Individual investors are raising bets on tech stocks

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Technology stocks have taken a beating this year. Many investors used it as an opportunity to double down.

The Nasdaq Composite Index — the market’s decade-long flagship of tech stocks — is down 21 percent in 2022. Shares of Amazon.com Inc.

AMZN 10.36%

And Google and Facebook META parents -1.01%

They also suffered double-digit declines due to high interest rates and a gloomy outlook on growth prospects.

However, many of these stocks remain popular among investors who are confident of a rebound and expect the companies to continue the economy.

In late July, individual investors’ purchases of a basket of popular tech stocks hit their highest level since at least 2014, according to data from Wanda Research. The basket includes FAANG stocks: Facebook parent Meta Platforms Inc., Amazon, Apple Inc..

APL 3.28%

Netflix Inc.

and Google parent Alphabet Inc.

GOOG 1.79%

– along with a few others like Tesla Inc.

and Microsoft Corporation.

Meanwhile, Apple, chip company advanced micro equipment Inc.

And the tech-heavy Invesco QQQ Trust exchange-traded fund remains among the most popular individual bets of 2020.

Technically and the interest in risky and leveraged funds tied to stocks like Nvidia Corp.

It has also become swollen, which is a sign that investors have come to play wild swings in stocks.

It has been a fruitful bet for many. Tech stocks have been on a rebound of late, partly due to investors’ slow path to interest-rate hikes in the coming months. The Nasdaq gained 12% in July, its best month since April 2020, outperforming the broader S&P 500, which rose 9.1%.

“The market is valuing how much technology can play in our lives,” says private equity investor Jerry Lee.


Photo:

Peggy Chen

“I’m very tech-savvy,” says Jerry Lee, a 27-year-old New York-based investor who founded a startup that helps people find jobs. The market is valuing how much technology can play in our lives.

In the coming days, investors will examine earnings reports from companies such as AMD and PayPal Holdings Inc.

For more clues about the direction of the market. Information on manufacturing and the labor market is also on tap.

After years of investing in a broad range of index funds, Mr. Lee said he has piled money into a technology-focused fund that counts Apple and Nvidia among its biggest holdings. He said his experience working at companies like Google made him pessimistic about the future of the field.

Gabe Fisher holds stock in Meta Platforms, Amazon and Alphabet.


Photo:

Ethan Kaplan.

Even last week, several industry leaders, including Apple, Amazon and Alphabet, warned that growth was slowing, and investors boosted stocks, expressing confidence that the companies could weather the uncertain economy. Apple posted its best month since August 2020, while Amazon completed its best month since October 2009, helped by a 10% jump in shares on Friday alone.

Many investors also fell into shares of Facebook’s parent, Meta Platforms. Shares of brokerage Fidelity were the top buy among individual investors on Thursday, as the social media giant fell 5.2% following its first-ever revenue decline. Tesla, Ford Motor Co.

Stocks tracking the tech-heavy Nasdaq-100 index also traded heavily that day.

Gabe Fisher, a 23-year-old investor near San Francisco, said he owns stocks such as Meta, Amazon and Alphabet.

“While these companies may not be growing as fast, they are still very relevant and widespread companies,” Mr. Fisher said.

He said he has a small position in Cathy Wood’s ARK Innovation exchange-traded fund, which he doesn’t plan to sell anytime soon, even though the fund has more than halved in value this year.

Other investors have turned to risky market corners. The exchange-traded fund tracking technology used is the third- and fourth-most popular ETFs for individual investors to buy this year, behind the S&P 500 and Nasdaq-100 index funds. These funds allow investors to make hedged bets on the market and can double or triple the daily return of a stock or index.

Many investors have turned to the options market to bet on technology. Silver bets that pay off if Tesla shares rise are among the most widely traded in the options market, according to Wanda. According to Wanda, individual traders spent more on Tesla call options on an average day than options on Amazon, Nvidia and Invesco QQQ Trust combined. They analyzed the average premium the company pays on out-of-the-money options, or away from where its shares are currently trading.

in Naples, Fla. Investor Jeff Durbin, 59, says he regrets missing out on buying big tech stocks decades ago.

He also picked up shares of companies such as artificial intelligence firm Upstart Holdings Inc..

and Shopify Inc.

Buy it -3.01%

– and despite the sharp swings, they hang on. Shopify, for example, said it would cut 10 percent of its global workforce, down 14 percent in a session last week. “It hurts, but I missed it when things like Amazon and Netflix were cheaper,” Mr. Durbin said. “Who will be Amazon and Apple 20 years from now?”

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