Are technology stocks still worth investing in?
Technology stocks have dominated markets in recent years, driven by their scale, strong earnings growth and, more recently, artificial intelligence (AI). Michael McNally, Junior Equity Analyst, explores whether tech stocks are still worth investing in, the risks of market concentration and what this could mean for your portfolio.
Junior Equity Analyst
23 Jun 2026
|Quick summary
Technology stocks have driven much of the market’s recent growth, helped by AI and the scale of the largest US companies. But are tech stocks still worth investing in? Michael McNally, Junior Equity Analyst, explores the case for and against.
How did technology companies become so powerful?
Technology firms can grow and scale faster than traditional businesses, which has helped them deliver strong returns and become a larger part of many portfolios.
Why is AI driving technology stock performance?
AI is reshaping how technology companies operate, making it central to whether the sector can continue to outperform.
Could tech stocks continue to dominate markets?
Supporters believe AI will drive productivity and growth, allowing leading technology companies to strengthen their position further.
Are technology stocks becoming riskier?
Sceptics argue rising costs, competition and uncertain returns from AI investment could reduce profitability and challenge current valuations.
Are there opportunities beyond tech?
Some non-technology sectors are beginning to outperform, highlighting that stock market leadership doesn’t stay in one place forever.
How should you look at technology exposure in an investment portfolio?
With strong arguments on both sides, a balanced approach can help reduce reliance on a single outcome and better manage uncertainty.
You are probably already investing in technology stocks - often through your pension, ISA or diversified portfolio - whether you realise it or not. Even if you don’t follow markets closely, it is difficult to ignore headlines about artificial intelligence, mega-cap technology companies and their growing influence on global stock markets.
As Kamal Warraich, Head of Fund Selection, recently highlighted in his article on stock market leadership, just 10 stocks now make up around 40% of the S&P 500 and nine of those are technology companies.
That concentration means two questions matter more than ever: are technology stocks still worth investing in, and how should investors think about them from here?
For investors, this isn’t just a theoretical debate. With technology playing a growing role in many portfolios, understanding the risks and opportunities behind that dominance can help shape how you think about your own investments.
How did the technology sector become so powerful
Technology companies tend to succeed by changing the way things are done - often quickly and sometimes completely.
This pattern tends to repeat - new winners emerge and older leaders fall behind.
On paper, that doesn’t sound especially attractive for investors. For example, the graph below shows Apple destroying the value of phone company BlackBerry by creating the iPhone, which introduced a touchscreen, had relatively good connectivity to the internet and made Blackberry phones quickly seem outdated. It compares the stock performance of both companies.
Apple disrupting BlackBerry by releasing the iPhone
Source: Canaccord Wealth, Bloomberg.
However, something surprising has happened in the 21st century - the big technology businesses have not (yet) been disrupted. Apple, for example, continues to sell iPhones for a premium, avoiding the fate it dealt to BlackBerry.
Many big technology businesses have posted phenomenal growth for decades now and revealed the unique economics of their business models. New subscribers cost software businesses almost nothing but when a car maker sells a new car it costs materials, parts, the factory, energy for the factory, shipping, tariffs and much more.
That difference helps explain why technology has been so successful and why so many portfolios are now heavily exposed to it.
Why investors are divided on technology and AI
Some readers may be tired of hearing about AI, but it’s changing the economics of the biggest technology businesses. Whether technology will continue to outperform has increasingly become a question of ‘is AI a good investment?’
So how should you think about technology today?
There are broadly two perspectives. Some investors remain confident that technology can continue to lead markets, while others are becoming more cautious about the risks building beneath the surface.
Scenario one: tech stocks continue to dominate
Proponents argue AI will increase productivity by making intelligence abundant and this already appears to be happening.
Anthropic, developer of some of the best AI models in the world, has analysed data which estimates AI is doubling US productivity growth and will continue to do so1.
AI is already moving beyond simply generating content - increasingly, it is beginning to take action and automate tasks, which could further accelerate its impact.
While many businesses will benefit from AI increasing productivity, it will be the technology businesses supplying AI with the leverage. This would support the view that technology companies can continue to justify both their dominance and their large role in portfolios.
Scenario two: technology dominance is challenged
Others argue AI is not increasing productivity as much as believed - instead suggesting technology stocks are in a ‘bubble’.
Many technology businesses that once scaled cheaply are now facing higher costs as they invest heavily in data and computing power to support AI.
This has started to create a divide within the sector. Hardware and software companies, which have typically moved closely together, have begun to perform quite differently since the release of ChatGPT.
The graph below shows how hardware stocks have been performing better than software stocks since the release of ChatGPT.
Hardware vs. software company stock performance
Source: Canaccord Wealth, Bloomberg
For hardware businesses, demand for chips has never been higher but their valuations have also never been higher. For software businesses, the threat of disruption has suddenly resurfaced. The scary news is sometimes businesses invent and displace technology but do not reap the rewards.
Many make the historical comparison between AI and the internet. However, ChatGPT generating text on screen is perhaps more like the invention of the printing press. The legacy of the printing press is immeasurably big as a technology but its legacy as an investment is an interesting lesson.
Johannes Gutenberg, the inventor of the printing press, went bankrupt. Why? The printing press cost too much to make before money was made selling books.
In 2026, the nine technology business I referenced at the beginning of the article are expected to make US$700bn in capital investments. Returns on this capital are diminishing and seem uncertain in the future. The nine companies used to make unbelievable cash flows (the money which flows to investors) but are now too busy spending every penny on computing power and data.
Where else could investors find opportunities?
Predicting AI winners and AI losers is very challenging and so the market has recently favoured sectors which have absolutely nothing to do with technology.
In some cases, more traditional, physical industries - such as infrastructure, materials or logistics - have outperformed parts of the technology sector.
That shift highlights how quickly leadership can change.
What tech exposure could mean for your portfolio
By now, you’ll likely be asking: ‘so, who is right about tech and AI stocks?’ Arguments made by fans and sceptics alike can be persuasive, suggesting the truth is somewhere in the middle.
A more resilient approach is to ensure your portfolio is not overly reliant on a single outcome - balancing exposure to long-term growth areas like technology with other sectors that could benefit if market leadership shifts.
That way, you are positioned for a range of possible outcomes, rather than depending on one.
How do technology stocks fit into your investments?
From pensions to ISAs, technology stocks can underpin a large part of many investment portfolios. Speaking to an expert can help you understand your exposure, manage concentration risk and consider whether your wealth is positioned for what comes next.
Frequently asked questions about investing in tech
Technology stocks may still play an important role in a diversified portfolio, but their recent dominance means investors should consider both the growth opportunity and the risks of relying too heavily on one sector.
Some investors believe valuations already reflect high expectations for AI and future earnings. Others argue that leading technology companies can continue to justify those valuations if profits and productivity gains keep growing.
The main risks include high valuations, market concentration, rising AI investment costs, competition and the possibility that today’s leaders are disrupted by newer technologies or changing market conditions.
The right level depends on your goals, risk appetite and existing investments. Many diversified portfolios already have meaningful technology exposure, so it is worth understanding where your returns are coming from.
AI could support further growth if it improves productivity, earnings and demand for digital infrastructure. However, the scale of investment required means future returns remain uncertain.
Important information
Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.
The tax treatment of all investments depends upon individual circumstances and the levels and basis of taxation may change in the future. Investors should discuss their financial arrangements with their own tax adviser before investing.
This is not a recommendation to invest or disinvest in any of the companies, themes or sectors mentioned. They are included for illustrative purposes only.
