Saltydog Investor looks at the evolution of the ‘tech’ sector

Over the last three years, Technology & Technology Innovation has been the best performing sector. It rose by 38.7% in 2023, 23.5% in 2024 and 15.4% in 2025.

Much of that growth was initially driven by the Magnificent Seven: Alphabet Inc Class A  GOOGL 0.36%, 

They became the new market leaders, replacing the FAANGs, which had dominated the previous decade.

Four underlying companies appeared in both groups. Netflix Inc NFLX 4.66% dropped out, while Microsoft, Nvidia and Tesla were added. Facebook and Google became Meta and Alphabet, respectively.

The FAANG companies were among the most successful businesses to emerge from the consumer internet boom. Their platforms and services helped make social media, internet search, e-commerce and streaming part of everyday life. The Magnificent Seven are the companies that went on to become the global digital leaders, with trillion-dollar valuations.

In recent years, artificial intelligence (AI) has also been one of the key drivers, not only for the Magnificent Seven, but also for businesses involved in using and implementing the technology. 

It has also boosted the companies building the necessary infrastructure – chip designers, semiconductor manufacturers, memory suppliers, data-centre operators, power equipment groups and industrial automation companies.

This year got off to a more subdued start, with the Technology & Technology Innovation sector making very little progress during the first couple of months. It fell by 0.03% in January before rising by 0.05% in February.

It then fell by 4.8% in March, as global stock markets reacted to the outbreak of the US-Iran conflict and the related jump in oil prices.

However, the sector then rallied strongly in April, rising by 15.8%, and the recovery continued throughout May, when it gained a further 16.5%.

Much of this was put down to renewed enthusiasm for AI and the rapid rise of companies such as Micron Technology Inc MU 5.50%, SanDisk Corp Ordinary Shares SNDK 14.13%, Advanced Micro Devices Inc AMD 4.26%, Dell Technologies Inc Ordinary Shares – Class C DELL 7.27%, Marvell Technology Inc MRVL 9.84%, Intel Corp INTC 5.25% and Broadcom Inc AVGO 2.41% in the US.

The same theme also supported renewed interest in Taiwan and South Korea.

Taiwan is home to Taiwan Semiconductor Manufacturing Co Ltd ADR TSM 2.27%, or TSMC. It is the world’s largest dedicated semiconductor foundry, manufacturing chips designed by companies such as Nvidia, Apple and AMD.

South Korea has Samsung Electronics Co Ltd DR SMSN 9.80% and SK Hynix. Both are major memory chip suppliers, and SK Hynix has become particularly closely associated with high-bandwidth memory, which is used in AI servers.

Japan also benefited from the renewed enthusiasm for AI. 

The Nikkei 225 includes several companies linked to the AI infrastructure theme, including Tokyo Electron and Advantest in semiconductor equipment, Kioxia in memory, Fujikura and Furukawa Electric in fibre-optic cables, and SoftBank through its technology investments. The index rose by 16.1% in April and 11.9% in May.

After such rapid gains, it is not unusual to see markets pause for breath or suffer a minor correction. With a couple of days left in June, the Technology & Technology Innovation sector is currently showing a month-to-date loss of 2.5%.

Ongoing concerns about the fragile ceasefire in the Middle East, rising inflation, and the possibility that interest rates may need to rise have unsettled investors. The recent Space Exploration Technologies Corp Class A SPCX 2.83%  IPO may also have reduced the amount of money available for investment in other technology shares.

The chart below shows the performance of three of this year’s leading technology funds.

All three followed a similar trajectory. There was relatively little movement until early April, followed by a significant rise throughout April and May.

Volatility has increased over the last four weeks, with no overall progress.

Saltydog has held the Polar Capital Global Tech I Inc GBP (B42W4J8) fund in its demonstration portfolios for almost a year. Over that period, it has risen by more than 100%. We are now watching closely to see whether the recent weakness is a temporary slowdown or the start of a more significant downturn.

The leading sector so far in June is Healthcare & Biotechnology, up 7.1%.

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