Thursday, 5 December 2024 Reading time : 2 minutes

The rise of technology stocks began about two years ago: at the end of November 2022, US software company OpenAI released the latest version of its ChatGTP language model, triggering a boom in artificial intelligence (AI). Within five days, one million users worldwide had registered to use the free AI tool. 

US tech stocks are also among the stock market favourites in 2024. Since the beginning of the year, the sector has gained almost 40% (as of December 4, total return), according to the S&P 500 Information Technology Index. This is slightly better than the overall index, which is up 29.2% over the same period. 

But not all technology stocks are equally popular with investors, as a look at the sub-segments makes clear. The technology sector can be divided into three categories according to the Global Industry Classification System (GICS): Software & Services, Semiconductors & Equipment and Hardware & Equipment. 

The performance of these sub-indices confirms that chipmakers in particular are benefiting from the AI boom. The Semiconductor Index¹ is currently trading almost 80% higher than at the start of the year. Once again, chip developer Nvidia stands out with a share price increase of over 190%. By comparison, the performance of the other two sub-segments seems almost modest: software stocks² rose by around 22% over the year, while hardware stocks³ gained almost 26%. 

In recent weeks, however, the dominance of chipmakers has waned, and investors have turned to software providers instead. Semiconductor stocks gained just under 1.2% in November, lagging behind the S&P 500 (+5.9%), while software stocks gained around 7.5%.

Recent gains in the software sector have been driven by US company Salesforce, which reported quarterly results this Wednesday and raised its revenue forecast for 2025. Shares rose almost 11% in response. 

Although the rally in chipmakers is fading as the year draws to a close, the outlook for the sector seems positive. The capital expenditure plans of technology companies bear this out. As such, Bloomberg Intelligence estimates that US tech heavyweights could invest up to USD 200 billion in 2025. This compares with spending of around USD 110 billion in 2023. Analysts expect investment to focus on data centre expansion and the development of AI-based assistants.

Barrier Reverse Convertible on US Software Providers
14.00% p.a. BRC on Adobe, Oracle, Salesforce and Snowflake
Barrier: 55%
Valor: 140 249 750

Barrier Reverse Convertible on US Chipmakers
14.00% p.a. BRC on Nvidia, Qualcomm and Broadcom
Barrier: 55%
Valor: 140 249 751

Barrier Reverse Convertible on US Hardware Providers
13.00% p.a. BRC on Dell, HP, Cisco and Apple
Barrier: 60%
Valor: 140 249 752

Indicative terms

¹ _{S&P 500 Semiconductors & Semiconductor Equipment Industry Group GICS 2 Index}
² _{S&P 500 Software & Services Industry Group GICS Level 2 Index}
³ _{S&P 500 Technology Hardware & Equipment Industry Group GICS Level 2 Index} 

 

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