"I remain concerned about the impact of recession on parts of the tech sector, but I see continued growth driven by 2 megatrends: the shift to digital experiences and the shift to cloud computing," says Nidhi Gupta, information technology sector leader and portfolio manager of Fidelity® Select Technology Portfolio.
Gupta says she believes in companies that are moving traditional offline experiences online, and firms that are helping these companies to make better business decisions with their data.
In the former group, Gupta says the shift of in-person experiences, such as watching a movie, shopping, or socializing, into the online world is a long-term megatrend that is likely to persist for years—regardless of economic conditions.
For this reason, Gupta has favored companies that are participating in and accelerating the shift to digital, such as Netflix (NFLX), Facebook (FB), Amazon.com (AMZN), and Latin American e-commerce provider MercadoLibre (MELI). Each was a non-benchmark fund holding as of the end of May.
When these experiences occur in the digital realm, they generate vast amounts of data, according to Gupta. She cites 2019 industry research from IDC that says the amount of data in the world will increase more than 28% a year through 2025.
A related megatrend, she says, is that digital businesses with this treasure trove of data are increasingly looking to cloud computing to draw data-driven insights to improve their businesses. This is happening, she says, via cloud services being offered at all levels of the information technology stack—infrastructure, platform, and software.
"Many companies are shedding their hardware and becoming software-led in every way," Gupta adds. Companies that provide the cloud services to help their customers make better business decisions, she says, include HubSpot (HUBS), Microsoft (MSFT), Salesforce.com (CRM), Elastic (ESTC), and MongoDB (MDB)—all overweighted fund positions as of May 31.
Fidelity® Select Technology Portfolio held securities mentioned in this article on May 31, 2020. As of this date, these companies accounted for the following percentages of fund assets: Netflix, 2.53%; Facebook, 3.40%; Amazon.com, 2.09%; MercadoLibre, 0.40%; HubSpot, 1.20%; Microsoft, 19.15%; Salesforce.com, 3.05%; Elastic, 1.18%; and MongoDB, 1.090%.
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