Technology stock

Quick definition

By:

Srijani Chatterjee

Srijani was a Financial Writer for Invezz covering stocks, investment funds, securities, and commodities. She is UK law-qualified and… read more.

Updated: Dec 31, 2021

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A technology stock is a stock of a company that researches, develops, or sells technology-based goods and services.

Key details

• A technology stock is a stock of a company in the technology sector that researches, develops, or sells technology-based goods and services to customers and other businesses
• Technology companies often heavily invest into research and development with a view of future growth and this makes their stocks speculative and risky investments
• Even though they carry speculative risk, technology stocks are often the most attractive to investors because they drive growth and trade at much higher price-to-earnings ratios than stocks in other sectors

What is a technology stock?

The technology sector is home to companies that focus on the research, development, and sales of technology-based goods and services. The stocks of these companies are technology stocks.

Most technology companies invest heavily into research and development with a view of increasing innovation for long-term potential. Due to the speculative nature of this view, technology stocks carry risk for investors as you are often investing in potential rather than actual value. This means that technology stocks often have much higher price-to-earnings ratios (a tool used by analysts to measure a stock’s relative valuation) than stocks in other sectors.

However, there is merit to the speculation as the American technology sector is home to some of the biggest companies on the market: Amazon, Meta (formerly Facebook), Apple, Google, Microsoft, Netflix, etc. Technology companies consistently doing well and increasing proof of the growth potential makes technology stocks appealing additions to investor portfolios.

Where can I learn more?

To learn more about technology stocks, and other key financial concepts, check out our full course page. Our range of courses cover everything you need to know about stocks and investing.