How do interest rates impact tech stocks?

How do interest rates impact tech stocks?

Interest rates can significantly impact tech stocks. When rates rise, borrowing costs increase for companies, which can reduce their growth potential and profitability. This often leads to lower stock prices.

Can you explain why higher interest rates affect borrowing costs?

Sure! Higher interest rates mean that loans become more expensive. Companies often rely on loans for expansion and innovation, so increased costs can lead to reduced investment in growth.

What about lower interest rates? Do they always benefit tech stocks?

Lower interest rates generally make borrowing cheaper, which can encourage tech companies to invest more in research and development. This can lead to growth and potentially higher stock prices.

Are there any exceptions to this trend?

Yes, there can be exceptions. For instance, if the economy is slowing down, even low interest rates might not boost tech stocks if consumer demand is weak.