Investing.com’s breakdown of amazing tech performance over the past 20 years

Investing.com — Over the past two decades, the technology sector has become a major driver of market returns, outperforming broader market indices.

This performance was influenced by a select group of dominant firms often referred to as the “Magnificent 7” (Mag 7).

However, Bernstein analysts in a note dated Monday said the technology sector continued to excel even when these top performers are excluded.

“Tech has outperformed the market by 500 bps per year over the past 20 years and by 800 bps per year over the past 10 years,” the analysts said.

This performance is largely attributed to robust revenue growth, which has consistently outperformed the broader market by 300-500 bps.

Despite the substantial impact of Mag 7, which collectively accounts for about 50% of the sector’s revenue and 65% of its market cap in the top 1,500 tech stocks, the tech sector has continued to outperform even when these giants are excluded.

When Mag 7 is removed from the analysis, the tech sector still shows strong performance. Over the past 20 years, the technology, excluding Mag 7, has outperformed the broader market by 100 bps annually.

This trend is even more pronounced over the past decade, when the sector has outperformed the broader market by 300 bps.

Over the past five years, the ex-Mag 7 tech has also managed to outperform the wider market, proving that substantial growth is not limited to the sector’s biggest players.

In terms of sector-specific performance, semiconductors emerged as the strongest performers.

“The semis sector was the best performer, even excluding Mag 7 (and Nvidia (NASDAQ: ),” the analysts said.

In contrast, the hardware and networking sectors struggled, especially when Apple is excluded from the analysis.

These segments have shown weaker revenue growth and lower yields, prompting Bernstein analysts to recommend a cautious approach to IT hardware stocks, suggesting they be treated as trading opportunities rather than investments. long term.

The global comparison further highlights the dominance of the US technology sector. The MSCI All Cap World Index excluding the US, which includes a market capitalization of $45 trillion and a technology composite of $6 trillion, lags the U.S. market, which boasts a market capitalization of $64 trillion of dollars and a technological composition of 23 trillion dollars.

Over the past 10 and 20 years, the US Tech Index (excluding Mag 7) has outperformed the MSCI ex-US Tech Index, returning 13% and 10%, compared to 12% and 8%, respectively.

Despite similar revenue growth rates between the international and US tech sectors, ex-Mag 7, valuations and market dynamics reveal a clear advantage for the US market.

The analysis also highlights the critical importance of stock picking in the technology sector. Historically, 49% of tech stocks have outperformed in any given year over the past 25 years.

This underscores the continued relevance of specialized analysis and careful stock selection given the sector’s rapid evolution and diverse opportunities.

In light of these perspectives, Bernstein analysts offer targeted recommendations in the IT hardware sector.

Apple (NASDAQ: ) and Dell Technologies (NYSE: ) are rated “outperform,” reflecting their strong performance and potential for continued growth. In contrast, HP Inc (NYSE: ) and IBM (NYSE: ) are market valued, indicating a more cautious outlook.