In a market traditionally dominated by resource giants, the remarkable ascent of technology shares on the JSE in recent times has slipped under the radar.
This year, the JSE’s technology index has gained 32.6% and delivered 54.6% over the past 12 months, leaving many other stalwart sectors of the bourse standing.
The big dogs have dominated – Naspers and Prosus have both climbed about 34% since January – but a number of other technology firms have followed their lead. Bytes has risen 23.9%, Datatec 34.4%, and Karooooo is up 4.9%.
This impressive rally is being driven by renewed investor enthusiasm for digital innovation and AI, with Tencent’s resurgence in Hong Kong underpinning the rise in Naspers and Prosus. Critically, Naspers announced this week that even without Tencent, the rest of its ecommerce businesses would have been cash flow positive.
It’s about time that the JSE played catch-up with global markets, where technology shares have been on a run. The Nasdaq-100 has risen 121% over the past five years, ahead of the New York Stock Exchange’s S&P 500. Firms like chipmaker Nvidia (up 1,500% over that time) led the surge.
But South Africa – historically dominated by mining stocks – has instead been riveted by the commodities boom. Yet this hasn’t delivered like technology.
Diversified miners like Anglo American (up 3.6% this year), Glencore (down 19%), and Thungela (down 35%) have had a torrid time. It is true that some have done well: platinum miners are up – Impala by 65% and Northam by 84%; and gold miners like AngloGold Ashanti are up 82%. But this is due to specific gains in their respective metals.
However, seen over five years, the technology sector has risen 60.5%, compared to mining’s 45.7%.
Yet industry experts caution that this contrast does not mark a permanent shift in investor appetite. Markets, they argue, move in cycles and the mining sector may simply be in a temporary downturn.
Chantal Marx, head of investment research at FNB Wealth and Investments, believes there are still long-term gains to be found in technology.
“The sector enjoys strong thematic support. It is geared towards invention, new industries and productivity improvement, which supports long-term performance,” she explains.
Naspers and Prosus remain the easiest way to increase exposure to the sector for investors, given that they are more mature and well diversified. “They offer a more stable way to gain exposure to global tech themes, which is why they continue to be highly rated,” she says.
The China syndrome
To understand the contrasting performances of technology and mining stocks, you need to consider the profit potential of each sector.
Siboniso Nxumalo, chief investment officer at Old Mutual Investment Group, says the profitability of the mining sector has, for about 20 years, been tethered to China’s appetite for commodities.
“China lifted hundreds of millions out of poverty by becoming the low-cost manufacturer of the world and investing heavily in infrastructure. This created massive demand for commodities,” he says.
But as China’s property sector and infrastructure growth hit a plateau, that demand waned – and this put pressure on mining profits.
By contrast, the resilience of the technology sector is supported both by global trends, particularly around AI, and the ubiquity of Tencent in Chinese life, where it is used for everything from payments to messaging, and computer games.
“Tencent is a fintech, gaming, cloud services and payments company,” says Nxumalo. “While infrastructure investment in China has slowed, consumer activity continues to expand. That has supported Tencent’s profits.”
The AI boom has only amplified this trajectory. “The market believes AI will change industries,” Nxumalo says. “This belief has driven demand for Tencent shares, which has in turn lifted Naspers and Prosus.”
Patrick Mathidi, head of multi-asset strategies at Aluwani Capital Partners, says that while South Africa has few listed technology stocks, their scale nonetheless makes them highly influential.
“Growth in [Naspers and Prosus] is tied to the global expansion of services like gaming, online shopping and AI. Our exchange lacks variety in tech listings, but the scale of these players means they are impossible to ignore,” Mathidi says.
Nxumalo agrees, pointing out that their scale shapes overall South African market sentiment.
“Naspers and Prosus are the biggest companies on the exchange. When they grow, they pull the JSE all share index up with them. When they fall, the index feels it too. Tencent, valued at about $600bn, is one of the largest companies globally. That kind of size moves markets.”
To switch or not?
So does this theme mean that investors should switch out of mining entirely, and plough their money into technology?
Not necessarily, analysts say. Mining may be battling headwinds, but no-one believes it has lost its relevance.
“There is no long-term shift from resources to tech,” Nxumalo says. “Markets are cyclical. At times tech will outperform, and at other times mining will. Platinum prices, for example, have risen more than 30% in the last month, and platinum shares have followed.”
Mathidi says any well-diversified investment portfolio would have both. “Traditional resource companies have been around for decades, and their business models remain relevant. They may simply be in a down cycle now, which is normal.”
Yet risks remain for those exposed to China – which doesn’t only imply an impact on miners, but also on Tencent.
“For Naspers and Prosus, the biggest risks are regulations in China,” Nxumalo warns. “When the Chinese government restricted gaming, those shares took a knock. Understanding what is happening in China is essential.”
Mathidi says that technology companies face faster-moving risks too.
“Business models in the tech space can change rapidly in line with shifts in the underlying technology,” he says. “That is a key difference compared with mining, where change is typically slower and more predictable.”
This was most evident in Nvidia, which saw its share price collapse 17% in January, when China’s DeepSeek released its own, far cheaper, AI model. Nvidia’s stock has since recovered from that low – but it’s an illustration of precisely the risk that Mathidi speaks of.
So can the rally in technology shares continue? Well, that depends on how far profits can grow.
“We think Tencent is an amazing company, and we see value in the business,” Nxumalo says. “As long as it continues to grow profits, the rally can be sustained.”
While this might suggest an opening for new technology shares to be listed on the JSE, creating a broader offering for investors in this sector, people shouldn’t get their hopes up. Mathidi reckons that barring any dramatic new developments, “the composition of the JSE is likely to stay the same”.
So how should investors read this moment in South African technology stocks? Is it a wholesale shift in market structure? Or more of a story of scale and sentiment hinged on specific stocks?
The answer is probably the latter. Naspers and Prosus, powered by Tencent, continue to dominate. Datatec remains a solid operator, as it has for many years. And a few of the newer firms, like Bytes, have captured some of the reflected glory from the global attraction.
Mining isn’t out of the game. But ultimately, as always, the market follows the money – and for now, the money is flowing through fibreoptic cables and cloud servers.
Top image: Rawpixel / Currency collage.
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