Man watching streaming TV
US Communications sector has outstripped tech this year / Image source: Adobe
  • US telco stocks have outstripped the performance of tech this year
  • Telco earnings growth has averaged 10% a year over the past three
  • Entertainment sub-sector projected earnings growth of 25.9% in 2024

Global equities have been on a relative tear so far this year led by Japan. Among major indices, the Nikkei 225 tops the lot, its 21.9% rise beating the rallies of US, Indian and European peers, and smashing the UK’s FTSE 100.

Yet US tech has grabbed most of the headlines thanks to AI (artificial intelligence), with stars stock like Nvidia (NVDA:NASDAQ) and Super Micro Computer (SMCI:NASDAQ) as hot as they come – up 92% and 259% already this year respectively.  

Little wonder that investors have become fairly neutral on US shares, sitting on a PE (price to earnings) multiple above the three-year average of 27.9, at 29.4.

Yet tech is not the best performing US sector this year. According to data from website Simply Wall Street, that title goes to telecoms, trumping its tech contemporaries by 13.5% to 11%.

But the Communications sector, to give its proper name, includes far more than fixed-line and mobile operators like AT&T (T:NYSE) or Verizon Communications (VZ:NYSE), with the likes of Netflix (NFLX:NASDAQ), Spotify (SPOT:NASDAQ) and Alphabet (GOOG:NASDAQ) adding significant growth spice to the space.

The US Communications sub-sector that most excites analysts is Entertainment, where analysts are expecting annual earnings growth of 26% over the next five years, according to Simply Wall Street data.

That compares to past earnings growth of around 12% a year.

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Issue Date: 27 Mar 2024