The Nasdaq Composite Index comprised mainly from stocks of information technology companies is down circa 12 % from its most recent peak.
We are witnessing a technology stocks valuation reset. And even though many previously high flying technology stocks look cheap mainly in comparison with their previous valuation metrics multiples, the Nasdaq Composite and technology stocks' prices could fall even more.
I forecast the Nasdaq composite will keep falling until roughly the end of February 2021. The Nasdaq Composite Index fall could reach 30 % from its November 2021 peak.
If the crash remains limited to technology stocks confines, the Nasdaq Composite fall could stop there. If due to negative wealth effect the tech stocks fall spills into the broader market economy, however, the the Nasdaq could end up correcting around 50 % from its November 2021 peak.
In fact, I believe that any stock, especially technology stocks, deserves a market capitalisation of above 20 billion USD only if they prove able to change the world, as is proverbial to say in Silicon Valley circles. Apple, Microsoft, Amazon, Alphabet(Google) and Meta(Facebook) ended up doing just that.
Yes, there are still many technology companies with market capitalisations above 20 billion USD, but now they are much less in numbers than just one month ago. Leading global central banks' money creation, investors' risk appetite/greed, low or zero central bank reference yields, low yield environment and obviously the technology and digitisation revolution we are observing currently lead to most technology stocks being overvalued. Some more, some less.
The current technology stocks correction will be an interesting phenomenon to observe and it will lucidly show which tech stocks were most overvalued. And many technology stocks bargains will emerge. In my opinion, the main factors that will determine which technology stocks will realise future value after the current technology stocks rout is done are profitability and growth potential of mainly the sector of the technology industry the company is active in, but also the growth potential of the individual technology company determined by its technology, strategy, management, agility, speed, distance from its competitors and the quality of its workforce.
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