What is Tech Street?

Tech Street is a term which refers to the technology sector, which divides into subcategories such as semiconductors, software and gaming, personal computers, data storage, telecom, IT services, internet services, and a host of others. Tech Street includes companies like Facebook, Google, Apple, IBM, Microsoft, and Texas Instruments.

Key Takeaways

  • Tech street refers to technology stocks, similar to how some may refer to Wall street when referring to stocks in general.
  • Tech street stocks include a wide array of industries including information delivery, internet services providers, wireless communications, and many others.
  • Technology stocks are often at the forefront of innovation, and there many of them will trade at high P/E ratios based on their growth potential.

Understanding 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 about movement or happenings in the technology sector.

Tech Street and the Rest of the Market

Tech Street is an crucial sector in the global market place and the financial markets. In today's world, technology helps facilitate global trade and allows investors to buy and sell securities with the click of a mouse.

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, gaming and app companies, internet companies, and hardware manufacturers.

Four big tech stocks are FANG, consisting of Facebook Inc. (FB), Amazon Inc. (AMZN), Netflix Inc. (NFLX), and Google-parent Alphabet Inc. (GOOG). Jim Cramer of "Mad Money" coined the acronym, and investors frequently compare the performance of FANG with market indexes.

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. FAANG is the same four stocks, with Apple Inc. (AAPL) added in.

Example of How Tech Street Got Out of Hand

Many new and innovative companies are located in the technology field. This means there are plenty of growth stocks in the space, and therefore, technology stocks tend to trade at high price/earnings (P/E) multiples. While a high PE is one thing, it can get out of hand.

During the technology bubble leading into the 2000 stock market peak, many company stocks were skyrocketing, but the company had no sales, no revenue, and not even a business plan. The Nasdaq Composite rose more than 550% between mid-1995 and the 2000 peak. By late 2002 it had fallen by more than 75%.

Tech street companies are known for introducing sexy new products and innovations. In the 1990s, the allure was the internet and how it would change everything. The internet did drastically change things, but a business still needs a business plan and growing earnings to flourish. The companies without these things ceased to exist