Technology Stocks: US vs China
With technological advances occurring on a near daily basis, technology sectors across the world are booming, and as such make for popular investment choices. Various investors are looking for the next lucrative opportunity to buy into companies which are performing well such as Apple, which recently saw its shares rise by 4.7%.
The US and China are both making significant advances in technology, so many investors are wondering which might offer the most profitable investment opportunity. Here are some considerations.
In recent years, China has become one of the major economic forces of the world, and this is set to continue as investment in the country’s economy grows. In fact, it has surpassed the US in many economic areas, and is set to be one of the world’s major superpowers for the foreseeable future.
Now that the country is garnering an increasing amount of international attention, people are on the lookout for opportunities to invest in some of the technology industry’s best performing companies, such as Alibaba, Baidu and Tencent.
Known as a hi-tech industry, green energy has been growing rapidly in recent years, and China has been ramping up its investment in the green energy sector in the hope of becoming a sustained world leader in the field. Investors are no doubt keen to exploit this by investing in Chinese green energy companies and promising startups.
The US, however, is planning major cuts to its renewable energy department, and Donald Trump instigated international outcry when the US exited the Paris Climate Accord earlier this year. This suggests that green companies might suffer in the short term as their funding dries up considerably.
When comparing US technology companies to their Chinese counterparts, it becomes clear that China is storming ahead. The CSI China Internet ETF has risen 56.4% in 2017, whilst Guggenheim China Technology ETF has risen 45.6%. The rise of these major players is representative of China’s intense focus on its technology sector.
That is not to say, however, that US stocks are performing badly. The Technology Select Sector ETF was up 18.7%, and Nasdaq-100 was up 21.2%. Google’s parent company Alphabet was up 19.4%, but this was dwarfed by Chinese search engine Baidu’s gains of 37%.
Is China the Winner?
For now, it seems, China is presenting investors with better potential returns on their investments when it comes to investing in technology companies. It should be noted, however, that rapid market gains can often be followed by a sharp fall in market value, which may lead to more investor caution when it comes to Chinese technology stocks.
Those looking for further lucrative investment opportunities may well have to wait until the market settles before they are comfortable investing in either country’s technology sector, unless they are willing to bet on continued success for each country’s technology companies.
Investing in Both
For the sake of portfolio diversification, it could be the case that investors will be attracted to tech companies in both countries, since this might reduce overall investment risk. Whilst Chinese stocks are performing well, it makes sense that companies from both countries will benefit from the gains they have made in the stock market, and the current investor confidence in the sector.
It remains to be seen which companies will use the increased profits most effectively, but it is certain that both countries will enjoy a surge in interest in their technology sectors and see major advances in their capabilities.
Both the US and China have booming technology sectors, and as such both are attracting investors from around the world. Whilst Chinese companies are making stronger gains than their US counterparts, both are currently popular options for investment.