SINGAPORE (Oct 13): For much of this year, global investors have been enamoured with “growth”, chasing large-cap tech stocks, or FAANNG — social media giant Facebook, e-commerce behemoth Amazon.com, smartphone powerhouse Apple, video-streaming pioneer Netflix, artificial intelligence chip leader Nvidia and dominant search engine Google’s parent, Alphabet.

The stealth tech stock rally in 2017 has been powered by the development of disruptive themes such as AI, blockchain, cloud computing, big data analytics, the sharing economy, machine learning and deep learning.

Global tech stocks have added a whopping US$2.45 trillion ($3.33 trillion) in market capitalisation over the past 12 months. Chinese tech firms alone have gained nearly US$320 billion in market value over the previous year.

Large internet platform companies such as Amazon, Facebook and Google are disrupting multiple sectors, including retailing, logistics, interactive gaming and video and filmed entertainment.

Indeed, some, like Amazon, are so feared that 15% of Standard & Poor’s 500 companies specifically mentioned the e-commerce giant in their last quarterly earnings reports.

Among the segments of the tech sector that look most promising are cloud, social media and e-commerce. The secular shift to digital, video, mobile and the way we consume services are driving the growth of internet stocks.

Already, the top five companies by value now are tech names. But have some of the tech stocks surged too far too fast? And are we headed towards another dotcom bubble?

“It is fair to say that overall valuations are a bit stretched, but we are in one of the longest business cycles in decades,” says Brent Thill, head of internet research for Jefferies & Co in San Francisco and one of the top-rated tech analysts in the US.

To find out if the internet stock rally still has legs, check out Issue 801 (week of Oct 16) of The Edge Singapore which is on sale now.

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