logo
  • Products

    Investment Vehicles

    • ETFs
    • Commingled Funds
  • Investment Strategies

    Investment Options

    • Alternatives
    • Beta Strategies
    • Equities
    • Fixed Income
    • Global Liquidity
    • Multi-Asset Solutions
    • Commingled Funds

    Capabilities & Solutions

    • ETFs
    • Global Insurance Solutions
    • Liability-Driven Investing
    • Pension Strategy & Analytics
    • Outsourced CIO
    • Retirement Solutions
    • Sustainable Investing
  • Insights

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Guide to Alternatives
    • Market Updates

    Portfolio Insights

    • Portfolio Insights Overview
    • Alternatives
    • Asset Class Views
    • Currency
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Portfolio Strategy
    • Sustainable Investing Insights
    • Strategic Investment Advisory Group

    Retirement Insights

    • Retirement Insights Overview
    • Guide to Retirement
    • Defined Contribution
  • Resources
    • Center for Investment Excellence Podcasts
    • Events & Webcasts
    • Insights App
    • Library
    • Taft-Hartley
    • market volatility
    • Morgan Institutional
  • About Us
    • Trusted Asset Manager
    • Diversity, Equity & Inclusion
    • Sustainable Investing
  • Contact us
Skip to main content
  • English
  • Role
  • Country
  • Morgan Institutional
    Search
    Search
    Menu
    You are about to leave the site Close
    J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
    CONTINUE Go Back
    1. Why do investors love technology companies?

    • LinkedIn Twitter Facebook Line

    Why do investors love technology companies?

    10/13/2021

    David Lebovitz

    Valuation matters when investing in the long-run, but so do corporate profits. Given the “all-weather” nature of earnings in the technology sector, it makes sense that these companies have become darlings of both public and private market investors.

    David Lebovitz

    David Lebovitz

    Global Market Strategist

    Listen to On the Minds of Investors

    10/13/2021

    It is well known that public market investors have embraced the technology sector with open arms since the financial crisis. However, it is important to recognize that this focus has manifest itself across private markets as well. So what is it that investors of all types find so attractive about these companies? And should their enthusiasm be curtailed by current valuations?

    To start, technology is becoming a larger and larger share of investment spending across the U.S. economy - put differently, this enthusiasm is not limited to the capital markets. As we show on page 39 of the Guide to Alternatives, as well as in the chart below, the steady increase in the share of private equity deals being done in the software sector has tracked a similar increase in investment in software across the economy more broadly. Furthermore, it is interesting to note that while private equity investors have always embraced technology, their focus within the sector has shifted over time. A decade ago, investors were focused on opportunities in hardware; today they are increasingly focused on software.

    Most investors seem to agree that technological adoption looks set to continue, but more and more we see people questioning the price they are paying for this exposure. However, it is important to recognize that technology is one of the few sectors that still has pricing power, which should allow these companies to defend both profits and profit margins against a backdrop of rising input prices. Furthermore, these companies have demonstrated an ability to generate consistent streams of earnings regardless of the macroeconomic environment; given at some point global economic growth will return to trend, this will be particularly important over time.

    Valuation matters when investing in the long-run, but so do corporate profits. Given the “all-weather” nature of earnings in the technology sector, it makes sense that these companies have become darlings of both public and private market investors. Furthermore, as populations around the world increasingly rely on technology for both work and pleasure, the idea of maintaining secular exposure to these companies - both public and private - makes a great deal of sense within the context of a diversified portfolio.

    Software investment and private equity

    % U.S. PE deals targeting software companies, software inv. % GDP

    Source: BEA, Pitchbook, FactSet, J.P. Morgan Asset Management. Software investment is represented by nonresidential fixed investment in software. Deal, exit and investment data are as of June 30, 2021. Data is based on availability as of August 31, 2021.

    09vv211210212706

    EXPLORE MORE

    On the Minds of Investors

    What investment questions are on the minds of investors? Explore the questions investors ask frequently and find answers at J.P. Morgan Asset Management.

    Read more

    Guide to the Markets

    The J.P. Morgan Guide to the Markets illustrates a comprehensive array of market and economic histories, trends and statistics through clear charts and graphs.

    Read more

    Asset Class Views

    Get quarterly commentary and in-depth analysis on equities, fixed income and other asset classes, written by our senior investment teams.

    Read more
    • Equities
    • Global economy
    • Alternatives
    J.P. Morgan Asset Management

    • About us
    • Investment stewardship
    • Privacy policy
    • Cookie policy
    • Binding corporate rules
    • Sitemap
    • Accessibility
    Opens LinkedIn site in new window
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

    The value of investments may go down as well as up and investors may not get back the full amount invested.

    Copyright 2022 JPMorgan Chase & Co. All rights reserved.