February 04, 2016

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Or is it not? A theory called “€œpeak connecting”€ is having a moment in the tech industry. First, the theory states that “€œthe reality is, we may be reaching simple physical limits on our ability to post and message,”€ as MoneyWeek suggested. Second, there’s “€œa limit to the number of social networks we can keep up with.”€ We may be approaching that very limit right now.

The concern remains that the tech bubble may burst, or, at minimum, that tech stocks will take a dive altogether; the whole sector crashes. Twitter’s stock is crashing as we speak (from $50 to $16 in nine months), with LinkedIn’s stock price under pressure along with shares in other vaunted tech companies. However, a consensus allows that the Big Five tech companies exist in an atmosphere of their own. They should be impervious to a sector crash, if it happens, because they”€™re highly profitable and cash-rich. Their stocks could, of course, sink too, if uninformed investors panic, say. Still, these five (Facebook, Amazon, Microsoft, Google, and Apple) are fundamentally strong companies with remarkable growth factors.

The real problem with the tech sector crashing, conceivably, is that the entire stock market crashes too, as MoneyWeek pointed out. “€œWhy? Because the valuations of [tech] firms are so high [that] they”€™re often propping up whole indices.”€ A huge amount of stock-market wealth has been tied up in these companies and their suppliers: The NASDAQ is all but dependent upon revenues from technology. “€œSocial media has crafted its own economy and it is a pretty big one”€”at least, in valuations, if not in revenues.”€ The court’s still out on that one.


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