The following content is not a personal recommendation to buy shares in the companies listed as I am not taking your personal financial situation into account.

Why Betting on the USA’s Tech Sector Has Been and Continues to be a Winning Move

The Business Mindset of the USA

I often struggle to put into words why I love the USA when it comes to investing. But a guest on the Compound & Friends podcast on Friday summed it up best when he said.

“The USA operates like a business.”

This is so true. And whilst the USA has its problems, most of the world’s greatest companies have been born and bred in the USA. And this is highly likely to continue well into the future.

The Tech Dominance: Past, Present, and Future

I am a strong believer that technology will continue to be the best performing sector over the next 20 years. Just as it has been the best performing sector for the last 20 years. I am not talking about individual years, but over a 10 to 20 year period. Nothing has come close to the returns the Nasdaq has provided. And I believe the next 10 to 20 years will be driven by the advancements in AI and robotics from companies listed on the Nasdaq.

Global Tech Players: The USA vs. The World

Of course, there will be companies listed in Europe, Asia and other places that will do well, but when we invest, we want to stack the odds in our favour. And I see no other place in the world where the odds can be stacked in an investor’s favour like with tech companies listed in the USA.

The Titans of Today: Leading the AI Revolution

Currently, there are about a dozen companies that dominate the technology / AI space today. And thankfully my portfolio owns some of them. I believe it is likely that these same companies, due to: their sheer size economic moat experience the head start they have the cash flows they produce and the talent they employ …will dominate the tech industry over the next 10 – 20 years.

The Investment Strategy: Quality Over Quantity

I won’t be right on all the tech companies that I own, but I don’t need to be. I’ll likely only need to be right on 1, and it will matter little what the others do. Australia is not known for technology innovation. And whilst there will be some great investing opportunities on the ASX, there will simply be more and better investing opportunities on the Nasdaq, in my view.

ASX vs. NASDAQ: A 20-Year Comparison

To emphasise my point, the following is what $1000 would have returned over the past 20 years invested in the ASX 200 vs the Nasdaq and the annual returns each year since 2003.

YearASX 200Nasdaq
200313.95%50.01%
200427.95%8.59%
200521.69%1.37%
200624.58%9.52%
200715.32%9.81%
2008-37.4%-40.54%
200934.35%43.89%
20101.21%16.91%
2011-10.88%-1.80%
201219.95%15.91%
201319.65%38.32%
20145.02%13.4%
20152.49%5.73%
201611.6%7.5%
201711.52%28.24%
2018-2.93%-3.88%
201923.14%35.23%
20201.89%43.64%
202116.73%21.39%
2022-1.26%-33.1
20231.68%36.97%
TOTAL$5306.19$10,751.47

The China Factor: A Shift in Dynamics

What I believe is important to consider is that during this 20 year period the ASX 200 (which is made up of over 40% mining and energy businesses), enjoyed the greatest tailwind it is likely to ever receive during my lifetime. China was devouring Australia’s iron ore and coal at record rates as China’s GDP was growing at between 6% – 12%. And whilst demand from China will continue, I don’t believe it will continue at the same rate that it has in the past. And therefore, the ASX 200’s mining heavyweights (that have contributed so much to the local market) may underperform.

The Non-Cyclical Nature of Tech Advancements

When it comes to the heavyweight technology companies listed on the Nasdaq, I simply don’t see them facing the same challenges. They will of course, have challenges, but I see a huge tailwind for the dominating technology players that are driving AI, semiconductor advancement, data centres, cloud computing, robotics and general technology advancement… which is not cyclical in nature like commodity businesses are.

The Compounding Effect: Patience Pays Off

I may be wrong with my analysis. But even if I am wrong, the companies that make up the lion’s share of my portfolio are still likely to return me some wonderful returns over time. And the compounding affect, provided I sit on my hands, will ensure I do just fine.

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