JONTY BLOOM
Journalist
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The actions of Chipmaker Nvidia have fallen since the start of this year
We have all heard of the automaker Ford, but what about its unique rivals Abbot-Dettoit, Acme, Adams and Aerocar?
No? Well, this is hardly surprising because unlike Ford, they all went bankrupt very early. And it is only a few of the car manufacturers who failed to start with the letter “A”.
We remember that winners who have continued to dominate the world automotive industry, and the current high technology sector is almost the same.
A large number of investors supported bad cars without horses about a century ago and lost their money. Only a few have chosen Ford or Chrysler, which is almost exactly what is happening now, only in the technological sector.
Technological actions have been extremely volatile in the past year, as has been largely reported, the graphs of the share of actions often resembling roller coaster, even before President Trump’s rates caused larger stocks of stocks.
According to Elroy Dimson, professor of funding at the University of Cambridge, is a main reason for this volatility in the technological sector, as the formerly emerging automotive industry, we do not know which technological companies will win in the long term.
“If you returned at the beginning of the last century, there were a lot of automotive companies, and it was clear that cars were going to make a huge difference,” said Professor Dimson. “But almost all companies have gone bankrupt, you did not know which company you should buy.”
Then, of course, all high -tech companies do not make money. The measurement of the performance of an investment in equities uses two factors, the growth in profits or dividends and the growth of the value of equities.
Boring companies could pay reliable dividends and see their actions gradually increase in value. But many high-tech companies do not pour much, if something in dividends. Instead, they invest in future growth, and therefore their share prices fluctuate according to the hopes of future profits.
Like Susannah Streeter, head of money and markets for the British Society for Financial Services Hargreaves Lansdown, said: “Technological actions are more volatile, they have high assessments and their price-benefit ratios are very high and growth actions are more sensitive to interest rates.”
But also, investors in such actions are, as Ms. Streeter says, the game on “Not Jam Today but Jam Tomorrow”. They all try to choose the next big winner, not the one who now pays the benefits, but the one who will end up bringing huge dividends in the future.
Thus, any new or even suggestion that future growth will not be as good as planned, stock values can collapse.
Susannah Street
Susannah Streeter says that technological actions are always a bet for investors
On the other hand, all good news increases the equity courses, even if the current profits, even the losses, do not change at all, because investors take hold of what they think is the future winner. Actions are more volatile because they are not taken out by current profits or dividends.
This means that Professor Dimson says it, “that small changes in growth expectations can cause significant changes in stock value”, which can affect a large number of companies at the same time.
“You have companies that are reasonably similar, so when growth rates change, this affects a lot of businesses in the same way,” he said.
“It is no different from Dotcom boom in the early 2000s. There were businesses with enormous growth prospects. And when growth prospects have disappeared, it is the companies that have disappeared.”
In addition, even today, there are not many large high -tech companies. In America, they are familiarly known under the name of “Magnificent Seven” – Nvidia, a flea manufacturer, alphabet, who owns Google, Amazon, Apple, Microsoft, Meta, the Facebook and Tesla parent.
Thus, it does not take much to scare the market, especially since several of these companies are really very young and are dominant in the sectors where the previous leaders have crushed and burned. Anyone remember Ericsson, Boo or Compa?
Technology, unlike steel production or food manufacturing, changes at a very rapid rate, and there is obviously the possibility that a new high -tech company comes and destroy the commercial model of its most established rivals.
There is simply no guarantee that the “magnificent seven” of today will remain magnificent or even will remain the same seven companies.
Take Tesla, for example, its sales recently decreased in response to two largely declared factors. First, some potential customers are opposed to the involvement of the owner of Tesla, Elon Musk, to the government of President Trump. And second, Chinese electric cars companies such as Byd are more and more competitors.
Meanwhile, Nvidia saw her stock market lesson drops sharply at the beginning of this year after the release of artificial Chinese Intelligence Chatbot Deepseek. This application would have been created at a fraction of the cost of its competitors.
Deepseek’s instant popularity has raised questions about the future of the domination of the American AI and the extent of the investments that American companies provide. This concerns NVIDIA because it is at the forefront of making microchips for the treatment of AI.
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Tesla’s course of action was reached by the two demonstrations against the brand and increased competition from Chinese competitors
AI is now the largest technological game in the city, and it seems that everyone claims that AI transforms its industry, their products and their profits. They cannot be right.
Or as Professor Dimon says: “At least in 1910, you knew what cars were doing, but today with IA companies, you have to count on the wisdom of the crowd, and for IA companies, which is not good enough.”
And all AI companies cannot win, adds Robert Whaley, finance professor at Vanderbilt University in Tennessee. “The AI certainly contributes to technological volatility. The race is on.”
This means that AI actions are sensitive to predictions. And any sign that a particular company is lagging behind in the AI breed can mean that many investors, most of which do not understand the subject, abandon it for another which seems to be more advanced.
Then, there are investors who do not seem to worry about the actions of the companies they buy, as long as they are in the high -tech sector “booming” because they speculate and disseminate their risks.
In short, stock prices are not always a rational measure of the value of a business, especially in the high -tech sector, or even its prospects. Instead, they can represent the optimism of investors. And optimism does not always last.
It is often short -lived, which passes and faddish. And sometimes optimism is faced with reality or simply fades. It is, in short, volatile.
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