The pandemic-tech bubble has burst

The Nasdaq is down 15% from its record high on November 22 high and that’s a garden-variety correction but the resilience of mega-cap tech masks the incredible pain a couple notches lower.

The relative resilience of Apple, Microsoft, Google and Amazon mask the pain down below.

Cathie Wood’s ARKK fund illustrates the beating that mid-to-large cap tech has taken. It’s down 58% since last February and 47% since November.

It’s third-largest holding is ROKU, the TV software/hardware platform. It’s down +20% today on weak guidance and trading at $114 from as high as $350 in October.

Roku

One after another, the pandemic tech darlings are being dragged out and shot. Teladoc is down to $69 from $308.PayPal is down to $105 from $310.

According to Ben Carlson,

  • Half of the Nasdaq Composite is down 30% or more
  • 40% of stocks are down 40% or worse
  • 35% of stocks are down 50% or worse
  • 28% of stocks are down 60% or worse

It’s clear that a bubble has burst here and there is tremendous pain in retail, which bid up many of these stocks. These were stocks that young retail traders poured into.

The thing is: I don’t think it matters to the broader market — at least not yet. Unlike in 2000, the mega-cap tech companies are underpinned by much stronger fundamentals. Yes, they could decline further with the Fed hiking but the damage in tech stocks isn’t going to upend the US or global economy. If anything, I’m impressed that broader markets have held up so well in this bloodbath.

The thing is, these stocks can still fall further. Many of them have no earnings so there’s no really any support and it’s fair to say that sentiment is deteriorating daily. Be careful out there.

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