Exploring Opportunities in the Tech Sector: A Look Beyond Amazon and Microsoft

As big names in tech Amazon (AMZN) and Microsoft (MSFT) gear up to report their latest quarterly earnings, many on Wall Street are looking towards this week for a signal as to how the market may move, considering the weight of these companies within the S&P 500 (^GSPC). But, could there be more to the story for the tech sector?

TPQ Advisory Founder & CIO Jay Pelosky joins Yahoo Finance to give insight into the performance of the tech sector and why he is looking outside of the US for opportunities in the tech sector.

Pelosky offers his views on China’s tech sector: “We’re more keen on tech outside the United States, and in particular, in China. And so, we have identified what we call a two-tech stack divide between the US and China, where both countries are basically sealing off their tech sectors from each other, and we think that creates a real opportunity within China tech, which has been a huge laggard versus the US. Its e-commerce market is twice the size of the US, growing at 10% per annum, and the stocks, like Alibaba (BABA), Tencent (0700.HK), etc, are trading at a 50 to 60% discount to the United States tech stocks.”

Pelosky emphasizes that earnings will be a key factor in driving the tech rally moving forward, but he sees more potential in tech investments outside the US, particularly in China. He believes that the two tech stack divide between the US and China presents a significant opportunity for investors, as Chinese tech companies are trading at a substantial discount compared to their US counterparts.

He points out that companies like Alibaba and Tencent are selling at low earnings multiples and have significant growth potential in dominating not only the Chinese market but also expanding into Southeast Asia. Pelosky sees the risk-reward opportunity in Chinese tech stocks as one of the best in the world, with limited downside risk and considerable upside potential.

Pelosky highlights the China tech ETF, K Web, as a compelling investment opportunity that could potentially double and double again before reaching its previous high in March 2021. He contrasts this with the US tech stocks, which are trading near all-time highs, suggesting that the potential for growth in Chinese tech stocks is much greater.

In conclusion, Pelosky’s insights shed light on the shifting dynamics in the global tech sector, with China emerging as a promising market for tech investments. As investors navigate the uncertainties in the market, looking beyond the US tech giants to explore opportunities in Chinese tech companies could prove to be a lucrative strategy.

For more expert insight and the latest market action, click here to watch the full episode.

This post was written by Nicholas Jacobino.