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Small Tech Stocks Soar as the Future Arrives Early

Fastly is up more than 310 percent this year. Zscaler is up over 180 percent. Chegg and Veeva are up 75 percent and 90 percent. In a tech universe dominated by Apple, Amazon, Microsoft and Google, the share prices of little companies you’ve probably never heard of are soaring.

The coronavirus pandemic has accelerated trends that were building for years by forcing large swaths of the population to work from home and shop online. And many obscure companies are taking off, driven by investors who expect them to flourish in an economy whose future arrived ahead of schedule.

“When it comes to remote work in particular, the past 10 weeks have seen more changes than we’ve seen in the previous 20 years,” said Erik Brynjolfsson, an economist and the director of the Digital Economy Lab at Stanford University.

Surveys conducted by Mr. Brynjolfsson and economists at the Massachusetts Institute of Technology found that the share of Americans working from home jumped to about 50 percent this year, from around 15 percent before the pandemic.

“We haven’t seen anything like it since World War II,” Mr. Brynjolfsson said of the broad work-force upheaval.

The tech-heavy Nasdaq composite index is up roughly 60 percent since it bottomed out in late March, and much of those gains can be attributed to the shares of the tech behemoths. Investors have bet heavily that those companies’ dominant market positions will only improve in the pandemic and its aftermath.

But the trajectory of smaller technology stocks has been even more remarkable. Zoom — the suddenly ubiquitous video conferencing service — has been an investor darling, up close to 500 percent this year as workplaces shut down. Peloton, the home video cycling company, is up almost 200 percent amid widespread gym closures — and just added to its product line.

Lesser-known companies are also posting eye-popping gains: Fastly, which sells services that enable faster delivery of increasingly complex video and gaming technology; Chegg, which offers digital textbook rentals among its education technology services; and Veeva, which provides cloud services to life sciences companies, including for management of clinical trials.

Information security companies have been of particular interest to investors, who see them as crucial to the future of remote working. Zscaler, for example, is a cloud-based information security company. Its fellow security service CrowdStrike is up more than 150 percent.

“What we’ve seen is an acceleration in the digital transformation,” said Jeff James, who manages small and midsize stock funds at Driehaus Capital Management. Last year, Mr. James bought shares of DocuSign, which provides digital signature software to companies ranging from BMW to Visa, betting on a company whose revenues had grown more than 30 percent annually. But with in-person meetings wiped out, DocuSign is in demand: Its revenues, in its most recent quarter, grew at a 45 percent annual pace. The company’s shares are up 166 percent this year.

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Credit…Mark Lennihan/Associated Press

“Households and consumers are consuming more technology to work at home,” Mr. James said.

Shares of online retailers like Carvana and Etsy are up more than 90 percent and 140 percent, as in-person shopping has collapsed. At the end of June, more than 16 percent of all retail sales were online, up more than five percentage points from last year. The last time e-commerce gained five percentage points of market share, it took roughly seven years.

Traditional retailers are scrambling to compete, and tech is there to capitalize, too: The number of stores served by Shopify, which helps them develop e-commerce operations, jumped 71 percent in the second quarter from the first three months of the year. Its shares are up more than 120 percent.

“We’ve seen the Covid-19 pandemic fundamentally shift the way businesses and consumers interact,” Harley Finkelstein, Shopify’s chief operating officer, told analysts after the company’s most recent earnings report. “It has catalyzed e-commerce, introducing major changes in buyer behavior and pulling forward what retail would look like in 2030 to 2020.”

The tech sector has a rich history of sizzling stock surges built on little more than optimistic outlooks; the bubble of the 1990s was replete with high-profile stock flops with little or no revenue, such as Webvan and Pets.com. But while those businesses rose on near euphoria about a digital economy that was still decades away, the success of similar businesses today — consider Instacart and Chewy.com — is grounded on the solid performance even in a deep economic downturn.

“The market, I think, is seeing them now going through the worst recession in history, and the worst pandemic in 100 years, and for those business models to come out stronger was something that a lot of market participants really took note of,” said Kyle Weaver, who manages growth-stock portfolios at Fidelity.

Part of that reflects the fact that these firms are simply taking market share in the downturn.

Normally, during a deep economic downturn, discretionary spending on home furnishings would collapse, Mr. Weaver said. But the online retailer Wayfair’s sales surged more than 80 percent in the second quarter as locked-down shoppers spruced up their surroundings. It posted its first profit as a public company.

Wayfair’s shares, which Mr. Weaver’s mutual fund owns according to its most recent public filings, have risen nearly 200 percent this year.

Alan Tu, who runs T. Rowe Price’s Global Technology Fund, owns a number of the smaller tech stocks that have surged this year, including Shopify and the cloud software and security companies Twilio and Datadog. (Both of those have doubled this year.)

Mr. Tu said he expected smaller tech companies not to lose the ground they had gained, even if their sales and shares didn’t surge the same way next year, because consumers and companies had gained new habits.

And now that they are using the products — whether DocuSign on an application to refinance a mortgage or Carvana to buy a car — they may find that they prefer them, he said. At the same time, the tech companies benefit from the increased business: Operational efficiencies take hold, and they can refine their products.

“Their services are getting better because of the increased demand, and so there’s sort of this flywheel effect where you have both demand and supply moving in the same direction,” Mr. Tu said. “It’s unlikely that we’re going to go back to the world that we lived in.”

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What Is QAnon, the Viral Pro-Trump Conspiracy Theory?

If you’re spending a lot of time online these days — and thanks to the pandemic, many of us are — you’ve probably heard of QAnon, the sprawling internet conspiracy theory that has taken hold among some of President Trump’s supporters.

But unless you’re very online, you likely still have questions about what exactly is going on.

QAnon was once a fringe phenomenon — the kind most people could safely ignore. But in recent months, it’s gone mainstream. Twitter, Facebook and other social networks have been flooded with QAnon-related false information about Covid-19, the Black Lives Matter protests and the 2020 election. QAnon supporters have also been trying to attach themselves to other activist causes, such as the anti-vaccine and anti-child-trafficking movements, in an effort to expand their ranks.

QAnon has also seeped into the offline world, with some believers charged with violent crimes, including one QAnon follower accused of murdering a mafia boss in New York last year and another who was arrested in April and accused of threatening to kill Joseph R. Biden Jr., the presumptive Democratic presidential nominee. The Federal Bureau of Investigation has warned that QAnon poses a potential domestic terror threat.

Last week, QAnon reached a new milestone when Marjorie Taylor Greene, an avowed QAnon supporter from Georgia, won a Republican primary in a heavily conservative district, setting her up for a near-certain election to Congress in November. After Ms. Greene’s win, Mr. Trump called her a “future Republican star.”

QAnon is an incredibly convoluted theory, and you could fill an entire book explaining its various tributaries and sub-theories. But here are some basic things you should know.

QAnon is the umbrella term for a sprawling set of internet conspiracy theories that allege, falsely, that the world is run by a cabal of Satan-worshiping pedophiles who are plotting against Mr. Trump while operating a global child sex-trafficking ring.

QAnon followers believe that this clique includes top Democrats including Hillary Clinton, Barack Obama and George Soros, as well as a number of entertainers and Hollywood celebrities like Oprah Winfrey, Tom Hanks, Ellen DeGeneres and religious figures including Pope Francis and the Dalai Lama. Many of them also believe that, in addition to molesting children, members of this group kill and eat their victims in order to extract a life-extending chemical from their blood.

According to QAnon lore, Mr. Trump was recruited by top military generals to run for president in 2016 in order to break up this criminal conspiracy, end its control of politics and the media, and bring its members to justice.

Not by a long shot. Since it began, QAnon has incorporated elements of many other conspiracy theory communities, including claims about the assassination of John F. Kennedy, the existence of U.F.O.s, and the 9/11 “truther” movement.

QAnon Anonymous, a podcast about the QAnon movement, calls QAnon a “big tent conspiracy theory” because it is constantly evolving and adding new features and claims. But the existence of a global pedophile cabal is the core tenet of QAnon, and the one that most, if not all, of its followers believe.

In October 2017, a post appeared on 4chan, the notoriously toxic message board, from an anonymous account calling itself “Q Clearance Patriot.” This poster, who became known simply as “Q,” claimed to be a high-ranking intelligence officer with access to classified information about Mr. Trump’s war against the global cabal.

Q predicted that this war would soon culminate in “The Storm” — an appointed time when Mr. Trump would finally unmask the cabal, punish its members for their crimes and restore America to greatness.

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Credit…Pool photo by Andrew Harrer

It’s a reference to a cryptic remark Mr. Trump made during an October 2017 photo op. Posing alongside military generals, Mr. Trump said, “You guys know what this represents? Maybe it’s the calm before the storm.”

QAnon believers pointed to this moment as proof that Mr. Trump was sending coded messages about his plans to break up the global cabal, with the help of the military.

Q’s identity is still unknown, although there have been hints and speculation about it for years. Some speculate that a single internet troll has been posting as Q the entire time; others say that multiple people are involved in posting as Q, or that Q’s identity has changed over time.

Making things more complicated is that Q’s online home base has changed several times. Q’s posts originally appeared on 4chan. Then they moved to 8chan, where they stayed until that site was taken offline last year after the El Paso mass shooting. They now live on 8kun, a site run by the former owner of 8chan. Each of these sites uses a system of identity verification known as a “tripcode” — essentially, a unique digital signature that proves that a series of anonymous posts were written by the same person or people.

“Drops” are what QAnon followers call Q’s posts. There have been nearly 5,000 of them so far, and most take the form of a cryptic coded message.

Here’s an example of a Q drop from September 2018:

PANIC IN DC

[LL] talking = TRUTH reveal TARMAC [BC]?

[LL] talking = TRUTH reveal COMEY HRC EMAIL CASE?

[LL] talking = TRUTH reveal HUSSEIN instructions re: HRC EMAIL CASE?

[LL] talking = TRUTH reveal BRENNAN NO NAME COORD TO FRAME POTUS?……………..FISA = START

FISA BRINGS DOWN THE HOUSE.WHEN DO BIRDS SING?

Q

In this post, you can see coded references to “LL” (Loretta Lynch, President Obama’s former attorney general), “BC” (Bill Clinton), “HRC” (Hillary Rodham Clinton), and “HUSSEIN” (President Obama), along with references to John Brennan, the former director of the Central Intelligence Agency, the Foreign Intelligence Surveillance Act, and “POTUS” — President Trump.

Many QAnon followers use “Q Drop” apps that collect all of Q’s posts in one place, and alert them every time a new post arrives. (One of these apps hit the top 10 paid apps in Apple’s App Store before it was pulled down for violating the company’s guidelines.) They then post these drops in Facebook groups, chat rooms for the Discord chat app and Twitter threads, and begin discussing and debating what it all means.

Yes and no. QAnon has been described as a “big-budget sequel” to Pizzagate, because it takes the original Pizzagate conspiracy theory — which alleged, falsely, that Mrs. Clinton and her cronies were operating a child sex-trafficking ring out of the basement of a Washington, D.C., pizza restaurant — and adds many more layers of narrative on top of it. But many people believe in both theories, and for many QAnon believers, Pizzagate represented a kind of conspiracy theory on-ramp.

One new element in QAnon is a number of clear and specific predictions about when and how “The Storm” would play out. For years, Q has predicted that mass arrests of cabal members would occur on certain days, that certain government reports would reveal the cabal’s misdeeds, and that Republicans would win numerous seats in the 2018 midterm elections.

None of those predictions came true. But most QAnon believers didn’t care. They simply found ways to reframe the narrative and ignore the discrepancies, and moved on.

It’s hard to say, because there’s no official membership directory, but the number is not small. Even if you count only the hard-core QAnon believers — excluding “QAnon-lite” adherents who might believe in a deep state plot against Mr. Trump, but not a cabal of child-eating Satanists — the number may be at least in the hundreds of thousands.

Some of the most popular QAnon groups on Facebook have more than 100,000 members apiece, and Twitter recently announced it was taking actions to limit the reach of more than 150,000 QAnon-associated accounts. A recent report by NBC News found that Facebook had conducted an internal study of QAnon’s presence on its platform, and it concluded that there were thousands of QAnon groups, with millions of members between them.

That number has probably grown during the pandemic, as people stuck indoors turn to the internet for entertainment and socializing and wind up being pulled into the QAnon community. A recent article in The Wall Street Journal found that membership in 10 large Facebook groups devoted to QAnon had grown by more than 600 percent since the start of lockdowns.

A common misconception is that QAnon is purely a political movement. But it functions, for people who believe in it, as both a social community and a source of entertainment.

Some people have compared QAnon to a massive multiplayer online game, because of the way it invites participants to cocreate a kind of shared reality filled with recurring characters, shifting story lines and intricate puzzle-solving quests. QAnon has also been compared to a church, in that it provides its followers with a social support structure as well as an organizing narrative for their everyday lives.

Adrian Hon, a game designer who has written about QAnon’s similarity to alternate-reality games, says that believers “open a fascinating fantasy world of secret wars and cabals and Hillary Clinton controlling things, and it offers convenient explanations for things that feel inexplicable or wrong about the world.”

Even though Q’s posts appear on fringe message boards, the QAnon phenomenon owes much of its popularity to Twitter, Facebook and YouTube, which have amplified QAnon messages and recommended QAnon groups and pages to new people through their algorithms.

In addition, QAnon believers have used social media to harass, intimidate and threaten their perceived enemies, and to seed other types of misinformation that wind up influencing public debate. Several of the most popular conspiracy theories on the internet this year — such as “Plandemic,” a documentary containing false and dangerous claims about Covid-19, and a viral conspiracy theory that falsely claimed that Wayfair, the online furniture company, was trafficking children — have been amplified and popularized by QAnon followers.

Some of these networks have started trying to remove QAnon content from their platforms. Twitter recently banned thousands of QAnon accounts, saying they had engaged in coordinated harassment. Facebook is reportedly coming up with its own QAnon containment strategy. But these interventions may be too little, too late.

It’s true that much of QAnon’s subject matter is recycled from earlier conspiracy theories. But QAnon is fundamentally an internet-based movement that operates in a different way, and at a different scale, than anything we’ve seen before.

For starters, QAnon is deeply participatory, in a way that few other popular conspiracy theories have been. Followers congregate in chat rooms and Facebook groups to decode the latest Q posts, discuss their theories about the news of the day, and bond with their fellow believers. The Atlantic has called it “the birth of a new religion.”

There’s also the basic danger of what QAnon followers actually believe. It’s one thing to have a polarized political discourse with heated disagreements; it’s another to have a faction of Americans who think, with complete sincerity, that the leaders of the opposition party are kidnapping and cannibalizing innocent children.

Combine those violent, paranoid fantasies with the fact that QAnon followers have been charged with committing serious crimes in Q’s name, and it’s no wonder people are worried.

Mr. Trump is the central and heroic figure in QAnon’s core narrative — the brave patriot who was chosen to save America from the global cabal. As a result, QAnon believers parse Mr. Trump’s words and actions closely, looking for hidden meanings. When Mr. Trump says the number 17, they take it as a sign that he is sending secret messages to them. (Q is the 17th letter of the alphabet.) When he wears a pink tie, they interpret it as a sign that he is freeing trafficked children. (Some hospitals use “code pink” as a shorthand for a child abduction in progress.)

Mr. Trump has never directly addressed QAnon, but he recently declined to denounce or disavow the movement when asked about his support for Ms. Green, the QAnon-affiliated congressional candidate. And he has shared posts from QAnon followers dozens of times on his social media accounts.

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Credit…Stephanie Keith/Reuters

Yes. For months, QAnon followers have been hijacking #SaveTheChildren — which started out as a fund-raising campaign for a legitimate anti-child-trafficking organization — as a recruiting tactic.

What they’re doing, basically, is using false and exaggerated claims about child trafficking to attract the attention of a new audience — in this case, worried parents. Then, they attempt to steer the conversation to QAnon talking points — saying that the reason children are being trafficked, for example, is because the global cabal wants to harvest a supposedly life-extending chemical from their blood.

This particular tactic has been especially problematic for legitimate anti-trafficking groups, who have had to deal with clogged hotlines and rampant misinformation as QAnon has latched on to their issue.

Merely posting #SaveTheChildren doesn’t mean your friends are QAnon believers. They could have just stumbled on a post about child trafficking that resonated with them and decided to share it. But they, and you, should know that those posts are part of a concerted QAnon strategy.

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