Observers worry that the stock market in 2021 will be a nightmare for technology giants based in Silicon Valley. This follows the decline in technology stocks similar to the dot-com bubble in 2000. Big Tech refers to Google, Facebook, Amazon, Microsoft, and Apple.
The emergence of the GameStop (GME) phenomenon to Tesla’s buying up Bitcoin should be an important lesson, especially for beginners in the stock market.
Quoting CNN, Wednesday (10/3/2021), many investors buy shares even though the company’s fundamentals are weak, as well as the IPO bubble. It can be seen from the excitement about GameStop, there is also the cinema network AMC, Express (EXPR), and KOSS whose shares just jumped.
The IPO bubble is a concern regarding expensive valuations. Because many companies are not profitable but still want an IPO. This reminds us of what happened in 2020 when the dot-com bubble occurred.
Good News: Lots of Unicorns Doing IPOs
The good news for investors right now is that many big unicorns have gone public through IPOs or listed their shares on an exchange.
The stock prices of the top tech companies, FAANG, Microsoft (MSFT), and Tesla currently dominate the S&P 500. According to FacSet, the S&P 500 is already trading over 21 so it is nearing its peak in March 2000.
In other words, the market is priced for a perfect price and that will be problematic. This is because if the stocks are the most increasing or bubbling, the selling action can last a long time and the damage will be severe.
Nasdaq once touched the 5,000 level in March 2020, this achievement occurred after successfully passing the 3,000 and 4,000 levels in just a few months. But once the dot-com bubble burst, the Nasdaq never climbed back above 5,000 until March 2015.
With that, last year’s brief pullback in the stock market after the start of the COVID-19 outbreak is a bit of a picture of what’s to come for tech stocks.