{"id":12290,"date":"2021-05-24T01:01:00","date_gmt":"2021-05-24T00:01:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=12290"},"modified":"2023-01-17T18:30:27","modified_gmt":"2023-01-17T18:30:27","slug":"are-we-in-the-middle-of-a-tech-bubble","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/are-we-in-the-middle-of-a-tech-bubble","title":{"rendered":"Are we in the middle of a tech bubble?"},"content":{"rendered":"\n

Shares in new technology companies in the United States have enjoyed a remarkable 16 months: the New York Stock Exchange Fang+ Index has risen over 100%. This index measures the performance of Facebook, Amazon, Apple, Netflix and Alphabet (formerly Google) or the FAANG<\/a> companies as they are collectively known, as well as other large tech companies.<\/p>\n\n\n\n

The SDPR Kensho Clean Power exchange-traded fund (ETF), which invests in renewable energy companies, has witnessed similar returns over the same period. But these are dwarfed by the return on shares in electric car company Tesla, which have risen by over 700% since the start of 2020 (see Figure 1).<\/p>\n\n\n\n

This might not seem surprising given how much life has moved online since March 2020 \u2013 a shift reflected in the record profits that some tech companies have reported. But the run-up in the prices of tech shares appears to be mainly an American phenomenon: the performance of European equivalents of the Fang+ index, such as the FTSE techMark All-Share index and the SDPR MSCI Europe Tech ETF, which invests in European tech shares, have been much less spectacular.<\/p>\n\n\n\n

Nevertheless, the high returns seen in the United States have led several commentators to suggest that we are now in a technology bubble.<\/p>\n\n\n\n

Figure 1: Return on shares in new technology companies since the start of 2020<\/h4>\n\n\n
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Chart References<\/div>\n\t
\n\t \tThe dot-com bubble<\/a>\t <\/div>\n\t \n\t