By Ambrose O’Callaghan
The S&P 500 Information Technology Index has continued to post strong returns to close out the winter season. Back in February, I’d discussed where the technology sector stood after an impressive winter earnings season. At the time, the “Magnificent 7” stocks had an outsized impact not just on the tech sector, but on the broader US stock market. Where do things stand as we enter the spring season?
What are some of the dominant themes in the technology sector right now?
Artificial intelligence (AI) was a pressing theme to start the New Year, and that continues to be the case in late March. The shift to more accessible AI technologies has transformative potential for the entire economy. These trends should be on every investors’ radar through the rest of 2024.
Cybersecurity is another area of interest in the tech sector right now. This week, the U.S. government warned state governors that foreign hackers were carrying out disruptive cyberattacks against water and sewage systems across the country. Indeed, the prevalence of cyber crime has continued to increase into the middle of the 2020s. Because of that, cybersecurity firms are going to play a crucial role.
Regulatory shifts are another big story in the tech space. For example, the US House recently passed a bipartisan bill to ban TikTok for domestic consumers or force its sale to another firm. The legislation was approved by a vote of 352 to 65. The bill, called “Protecting Americans from Foreign Adversary Controlled Applications Act” will not move to the US Senate, where it has considerable support. President Joe Biden has vowed to sign the bill into law if it reaches his desk for approval.
What is generative AI? What role do GPUs play?
The introduction of ChatGPT to the public in November 2022 kicked off what some have called the “democratization of AI hardware”.
Generative AI refers to AI that produces various types of content. That includes text, imagery, audio, and synthetic data. Chatbots have been a reality since the 1960s. However, the introduction of generative adversarial networks (GANs) was able to radically change things in 2014. This machine learning algorithm meant that generative AI would be able to create convincingly authentic images, videos, and audio.
Graphics processing units (GPUs) serve to break complex problems into thousands or millions of separate tasks to work them out all at once. This is what makes GPUs ideal for graphics. Textures, lighting, and the rendering of shapes must be done at once to keep the images consistent on the screen.
GPUs have become instrumental in generative AI due to their parallel structure. Because GPUs can perform thousands of simultaneous operations, it aligns perfectly with the tasks that are required by neural networks. Generative AI relies on that technology to operate effectively. The critical role GPUs play in generative AI has contributed to the surge in revenue experienced by a company like Nvidia, which manufactures GPUs.
How has the narrative shifted in cybersecurity?
Fortune Business Insights recently estimated that the global cybersecurity market was valued at US$172 billion in 2023. The same report projected that the market would reach US$424 billion by 2030. That would represent a compound annual growth rate (CAGR) of 13.8% over the projected period.
CrowdStrike unveiled its fourth quarter (Q4) and full year fiscal 2023 earnings on March 5, 2024. Full-year revenue surged 36% year-over-year to US$3 billion. Meanwhile, it reported net income for the fourth consecutive quarter. The company is focused on achieving $US10 billion in annual recurring revenue by 2030.
Why the HTA ETF is worth consideration in the spring of 2024?
The Harvest Tech Achievers Growth & Income ETF (HTA:TSX) is focused on delivering exposure to the dominant players in technology, an innovation-led mega sector. The ETF holds large-cap technology companies that now lead this space. Moreover, the ETF is designed to provide a consistent and competitive monthly income by employing an active covered call strategy.
Units of HTA have climbed 25% over the past six-months as of late morning trading on Thursday, March 28. The ETF is up 34% in the year-over-year period. Better yet, HTA has delivered a monthly distribution increase for three consecutive years. It last paid out a monthly distribution of $0.12 to unitholders. That represents a current yield of 7.95% as at March 27, 2024. That’s the yield you get if you bought the ETF a price of C$18.12 and collect cash distribution of $0.12 per unit over the next 12 months.
HTA received a 2023 Lipper Award Fund Award for Best Sector Equity Fund Over 5 Years (Class U). This was the second consecutive year that HTA received a coveted Lipper award. Investors who are seeking growth and consistent monthly income may want to consider HTA today.
Disclaimer:
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently, and past performance may not be repeated. The content of this article is to inform and educate and therefore should not be taken as investment, tax, or financial advice.
