The Strange Situation With Tech Stocks

Tech stocks are not exactly doing well lately. Apple has taken a plunge. Netflix is down somewhat. Other stocks are disappointing those who thought they could make a nice return in short order. Tech stocks had been delivering huge earnings in 2017 so assumptions tech would keep doing well were not exactly off the mark. The massive growth of Amazon revealed that tech stocks were good bets. Early June 2017, however, shows the tech world is not the proverbial hottest ticket in town anymore.

 

The industry does present bright spots along with stocks doing fairly well. Nvidia stock performed excellently despite the overall downtrend of the market. While Apple lost 3% of its worth, Nvidia’s price climbed quite high. In less than a year the stock went from below $50 a share to over $149. That is one massive return.

 

The word “bubble” is being used a lot these days. Specifically, analysts great and small keep talking about a “tech bubble.” The concept of a stock bubble centers on the notion the bubble expands in the form of increasing value and then bursts. The bursts reflects and immediate and massive decline in stock value price.

 

Bubbles can and do occur. A cursory glance of the past 100 years of financial history reveals instances of bubbles and their subsequent crashes. Assumptions that a tech bubble is possible make sense, but so does the notion these assessments are overstated. Apple, for example, is a multi-billion dollar company that has been around for decades. Apple generates untold billions of dollars in revenue each and every year. The idea that Apple — or Google or Amazon — will experience a major crash and never bounce back is possible. Is it probable, though?