Technology stocks: why this slump has gone too far

The bad times seem to be back for the IT industry and stocks have been hammered. But, says Eoin Gleeson, we are ignoring how much technology has become a part of the fabric of the economy. Here, he gives his view of the sector and picks one promising stock.

The tech-stock crash at the start of the decade left many investors with badly burned fingers. After years of soaring valuations and rampant expansion, tech stocks peaked in 2000 and began to fall. Then, to make matters worse, IT budgets were slashed heading into the 2001 recession. Stock prices even those of the more respectable technology firms collapsed across the sector.

The next few years saw a recovery, but the bad times are back. Now that the global economy is slowing again, Aim-listed IT stocks have been hammered sold off by fund managers who fear IT budgets will be slashed, just as in 2001. But what the market is ignoring is the extent to which technology has become a part of the fabric of the economy over the last ten years. A recent YouGov survey of 15 million broadband users in Britain found that only one in ten people would consider giving up their connection to economise during the downturn. Nearly a third said they'd give up cigarettes and alcohol before they cancelled their broadband connection.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.