More than half of 2020 is already over with no major economic, financial, political, or technological breakthrough. The global economic and financial landscape is rotating around a health hazard — coronavirus — and its economic devastations.

The U.S. and the global financial markets are in a downturn facing severe volatility. Despite the gloomy scenario, the Nasdaq Composite Index is up more than 20% year to date, much to the delight of market participants. In comparison, the S&P 500 has just managed to enter positive territory and the Dow is still in the red.    

Impressive Performance by Nasdaq Composite

Nasdaq Composite ended 2019 providing 35.2% return, its best performance in six years. The tech-laden index started 2020 from where it ended last year. Barring a coronavirus-induced short bear market, the index maintained its northbound trajectory.

On Jul 20, Nasdaq Composite ended at 10,767.09, its 28th closing high so far this year. During intraday trading, the index recorded a fresh all-time high of 10,783.80. Notably, the tech-heavy index skyrocketed 62.4% from its recent lowest level recorded on Mar 23.

Is Technology Sector Overvalued?

Since the Nasdaq Composite is a tech-heavy index, its performance is directly related to the technology sector. Several economists and financial experts have warned that the technology sector is overvalued and a second wave of COVID-19 in the United States and several other large economies will ultimately end the technology bubble.

Let's consider that the coronavirus related problems will stay in 2020 and no vaccine or a definite line of treatment will appear in the near future. Yet, the technology sector will survive. The outbreak of coronavirus globally has established digitization as the new normal for what is being touted as going to be a very long time.

As social distancing is keeping near and dear ones away, people, especially citizens of emerging and less-developed countries, are reaching out more than ever with smartphones, tablets or notebooks.

The thrust for digitization is likely to come from two sides. Individuals who enjoy immense benefits of digital platforms are less likely to go back to their old habits. The new way of connecting to one another has opened a new world for them. Also, business entities will be more interested in cloud computing, automation, and artificial intelligence to establish smooth supply chain systems. 

Will the Tech Momentum Continue?

Several financial market experts and watchers have also warned that tech stocks will lose investors' preference once the spread of the deadly virus is contained. Reopening of the U.S. and global economies will make major stocks of other sectors more lucrative.

Yet, we must not forget that rising demand for high-tech superior products has been a silver lining for the technology sector in an otherwise tough environment. A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants, and IoT, has boosted the overall technology sector.

Generally, investors opt for safe-haven assets like government bonds, gold, and high-yielding defensive stocks during severe market volatility. However, after taking a closer look at Wall Street's performance in the last four months, it seems that the growth-oriented technology sector has become the new safe haven.

Therefore, coronavirus or no coronavirus, the north bound journey of the technology sector is likely to continue.

Our Top Picks

We have narrowed down our search to five large-cap (market capital > $10 billion) technology stocks that popped more than 40% in the past three months.

These stocks have strong growth potential and robust earnings estimate revisions for 2020 indicating the strength of their business model. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy).

The chart below shows the price performance of our five picks in the past three months.

Etsy Inc. (ETSY - Free Report) operates online market places for buyers and sellers primarily in the United States, the U.K., Canada, Australia, France, and Germany. Its online market places include Etsy.com and Reverb.com.

The Zacks Rank #1 company has an expected earnings growth rate of 46.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 5.7% over the last 30 days. The stock has climbed 74.4% in the past three months.

Zoom Video Communications Inc. (ZM - Free Report) provides a video-first communications platform worldwide. Demand for its remote work platform and solutions is expected to remain robust as some form of social distancing will be required until a vaccine or any effective treatment for coronavirus is developed.

The Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 12.5% over the last 30 days. The stock has jumped 87.4% in the past three months.

Microchip Technology Inc. (MCHP - Free Report) develops, manufactures, and sells semiconductor products for various embedded control applications in the Americas, Europe, and Asia. The Zacks Rank #1 company has an expected earnings growth rate of 3.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 0.7% over the last 7 days. The stock has surged 44% in the past three months.

Zscaler Inc. (ZS - Free Report) operates as a cloud security company focusing on transforming networks and applications for a mobile and cloud-first platform. The Zacks Rank #2 company has an expected earnings growth rate of 32.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 3.7% over the last 7 days. The stock has soared 95.8% in the past three months.

Teradyne Inc. (TER - Free Report) designs, develops, manufactures, sells, and supports automatic test equipment worldwide. It operates through Semiconductor Test, System Test, Industrial Automation, and Wireless Test segments.

The Zacks Rank #2 company has an expected earnings growth rate of 8.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 1% over the last 7 days. The stock has rallied 47.7% in the past three months.