Jim Edwards | Business Insider
Jan. 20, 2014
With 2013 behind us, we’ve got another year of data on investment in the tech sector.
It’s very healthy indeed — perhaps too healthy.
We noted recently that tech investment appears to be approaching a peak, possibly a bubble. Now, with the new data in, the debate is not whether the tech sector has hit a peak. It has hit a peak. Some financial metrics in the tech sector — deal volume in particular — have actually exceeded those seen in 1999 and 2000, as we show below.
Rather, the debate now is whether this peak is part of a long, ongoing boom fueled by game-changing companies with real revenues and real customers — Facebook and Twitter being the most obvious — or whether the rollercoaster has reached the top of its track and is headed for a gut-wrenching fall.
Here’s the evidence.
The Nasdaq has hit 4,000 again. Last time it did that, it was 1999.
On it’s own, it’s just a coincidence. But remember that these stocks are responding to an environment in which interest rates are at zero. Stocks are the sensible alternative when there is no money to be earned via interest on savings. The moment the Fed raises rates, investors will be able to get a risk-free return greater than zero from cash savings … and a bunch of money will exit stocks. Falling stock prices will have a domino effect across the tech sector, as newly poor investors think twice about backing venture funds and new startups.