US tech stocks are taking a breather, and given how the sector is still trading at record levels, there is a growing chorus that valuations are stretched and that a significant correction is due.

Hou Wey Fook, DBS’s chief investment officer, does not buy that argument. Rather, he sees that current valuations are now at a more “reasonable level”.

Speaking at a briefing for DBS’s 4Q2021 investment outlook, Hou feels upbeat about the US tech sector from another perspective: the staying power of the leading tech names like Microsoft Corp, Facebook, Amazon, Apple and Alphabet (parent company of Google). He observes that these businesses tend to be “asset-light, and most of them, very scalable”. This allows them to generate very high-profit margins.

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