ASX tech shares have had a rollercoaster start to 2020.
While the S&P/ASX 200 Index (ASX: XJO) has fallen 18.97% lower, it's been more of a mixed bag on the tech scene.
We've seen some companies like Nextdc Ltd (ASX: NXT) thrive despite the bear market. The Aussie data centre operator's shares are up a handsome 39.21% in 2020 to $9.16 per share.
But is Nextdc a flash in the pan or could ASX tech shares outperform in 2020?
Why ASX tech shares can outperform in 2020
There are a couple of forces that I can see working against each other for ASX tech shares in 2020.
On the one hand, the complete overhaul in society driven by the coronavirus pandemic could present opportunities for Aussie tech companies.
We're seeing more demand for remote working solutions and data security. I think this is a key component behind the Nextdc share price surge – a focus on future trends.
Of course, if we're investing for the long-term, we should be focused on sectors that will benefit in decades to come.
However, there are also more immediate forces at play for ASX tech shares like Xero Limited (ASX: XRO).
The Xero share price is down 1.02% this year, which still represents significant outperformance against the benchmark index.
Part of the appeal in Xero is a focus on cloud accounting, which might be particularly useful for small businesses given these uncertain times. Xero continues to land big clients and its subscription model could be a real saviour come the August earnings season.
We've also seen other ASX tech shares like Altium Limited (ASX: ALU) outperform recently despite COVID-19 concerns. Altium shares could be a good coronavirus hedge given its robust cash flow and strong balance sheet.
On the other hand, bear markets tend to see investors flock to safety. That means growth shares, being those that are highly valued relative to earnings, can be hit hard.
However, I think ASX tech shares with strong fundamentals and minimal debt could be in the buy zone in the coming months.
