What is Tech Street
Tech Street is a term which refers to the technology sector, which divides into subcategories such as semiconductors, software, hardware, IT services and internet. Tech Street includes companies like Facebook, Google, Apple, IBM, Microsoft and Texas Instruments.
Breaking Down Tech Street
Tech Street, as a term, is modeled on the metonymic uses of terms like Wall Street, Bay Street and Dalal Street for large stock exchanges. Whereas those refer to actual streets that house the headquarters of stock exchanges in the United States, Canada and India, respectively, Tech Street does not refer to an actual location.
Financial news organizations use the term Tech Street in headlines to speak metaphorically about movement in the technology sector.
Tech Street and the Rest of the Market
Tech Street is an crucial sector of the market. Tech Street companies render important services to consumers as well as businesses. Over the years, the range of products and services represented by Tech Street has drastically expanded. Today, the technology sector is a large and diverse grab bag of industries and includes cloud computing companies, television and home-appliance manufacturers, internet companies and hardware manufacturers.
Four big tech stocks are FANG, which consist of Facebook, Amazon, Netflix, and Google-parent Alphabet. Jim Cramer of "Mad Money" coined the acronym, and investors frequently compare the performance of FANG with market indexes. In 2017, FANG dwarfed market returns. Like the technology sector as a whole, the movement of FANG stocks largely determine the movement of the market. That is, when FANG goes up, the market goes up. When FANG goes down, the market goes down.
Tech Street Bubble
Because Tech Street stocks hold the promise of breakthroughs that will drastically improve efficiency or even create whole new business models, they trade at very high price-earnings ratios. That is, when investors buy tech stocks, they are not just paying for the value a company delivers in the present, but the value a company might deliver in the future, assuming a game-changing technological innovation comes along.
This enthusiasm for Tech Street gives those stocks an inordinately large market capitalization and therefore an outsize influence on market indexes and averages. As of July 1, 2018, just four tech stocks, namely Amazon, Microsoft, Netflix and Apple, were responsible for 84 percent of the S&P 500 Index’s year-to-date gains. This enthusiasm that pushes tech stocks up even as the rest of the market falls has some analysts calling it a bubble. A tech bubble could be particularly dangerous to the market as a whole, given how dependent it is on Tech Street.