Reality is creeping in on the Nasdaq’s year long dream rally
tech stocks all year. Surging valuations and elevated interest rates doom them. Earnings forecasts are a fantasy.
Regulators are set to break up their sprawling monopolies.
Individually, none of these bearish prophecies have slowed a market rally that has added $5 trillion to the Nasdaq 100’s value since December. But when they start exerting fresh pressure all at once, even the boldest proponents of artificial intelligence can be forgiven for feeling sheepish.
Such was the case this week. China’s expansion of a ban on Apple Inc.’s iPhone landed just as bond yields nudged higher, underlining a market-valuation picture that some see an outright bubble.
Coming off its best week since June, the Nasdaq slumped, with Apple and rally champion Nvidia Corp. both notching their second-worst falls of the year.
The burden faced by investors inclined to take a flyer on software and internet stocks is clear when looking at the headline fundamentals. Nasdaq 100 equities trade at 27 times annual earnings, 35% above the S&P 500 — whose own valuation is inflated by the same tech megacaps.
