For years, investing in technology firms seemed like a no-brainer.
The share prices of Silicon Valley giants surged higher and higher as technology burrowed deeper into our lives.
But investor sentiment has shifted in the wake of the Facebook data-leak scandal this week.
Face off: Mark Zuckerberg with his chief operating officer Sheryl Sandberg
It is thought governments and regulators will clamp down on how social-media sites use the extremely profitable data that their users provide.
And advertisers are now threatening to spend their cash elsewhere, which would deal a double blow to tech firms.
Therefore it’s likely tech companies are in for a period of lower earnings, experts say.
And anyone who invested in tech in the late 1990s before the dotcom bubble burst will be getting jittery. So is it time to take some profits?
More than £120 billion has been wiped off the value of so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) over the past week – and any change in sentiment seems to push them lower.
But over the years, many of the major tech stocks have been astounding investments.
Facebook’s shares have grown 446 per cent since it floated in 2012
Facebook’s shares have grown 446 per cent since it floated in 2012, while Amazon’s have grown 1,000 times over since it listed 21 years ago. Netflix has gone from around $1 a share in 2002 to $305 today.
Adrian Lowcock, of investment firm Architas, says now might be the time to take some of the profit from tech investments.
‘In the short-term there is definitely a chance of a correction in the technology sector, especially as the threat of regulation – and even Trump’s trade war – looms over them.
‘I don’t think it does you any harm to bank some of the profit you have made. It is better to rebalance your portfolio now rather than waiting for the market to do it for you.’
Despite fears of plunging share prices in the sector, experts agree they have the potential over the long-term to keep growing.
Despite fears of plunging share prices in the tech sector, experts agree they have the potential over the long-term to keep growing
And though some companies, such as Amazon and Netflix, look expensive, it also shows investors have faith in their ability to turn big profits.
Ben Yearsley, of adviser Shore Financial Planning, says: ‘I’m a big believer in technology as a long-term investment theme. It is part of our everyday lives and it will continue to be in the future.’
And there doesn’t seem to be a challenge to the FAANG’s hegemony, experts say.
Even if there were, the Silicon Valley behemoths have enough cash to scoop them up. It means the big players are unlikely to be knocked off their perch any time soon.
And though there are concerns that a clampdown will hit margins, many of these companies will remain incredibly profitable.
David Jane, manager of Miton’s multi-asset fund range, says: ‘You need to ask yourself whether these firms have sustainable growth. I think they will be fine.’
While experts believe there is still money to be made in tech, it is wise to tread carefully until its future is clearer. If you do want to invest, do so via the less-risky option of a fund rather than buying individual shares.
Yearsley tips the Polar Capital Technology Trust, which has turned £10,000 into £26,860 in the past five years.
It counts Google, Microsoft, Apple, Facebook and Amazon among its biggest holdings.
But it also holds Korean electronics giant Samsung, Tencent, China’s answer to Facebook, and Alibaba, China’s biggest internet retailer.