June 19, 2023

Extreme Valuations, Slowing Growth, And Rising Yields Make Tech Stocks A Dangerous Bet

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Summary

NASDAQ 100 valuations are not nearly as extreme as they were at the 2000 peak, but at 40x free cash flows, they are still extremely expensive.
Such valuations can only be justified by rapid growth, but real sales growth has been trending lower for years and sits at just 2% y/y.
The risks posed by this combination of expensive valuations and slowing growth are heightened by the rise in corporate bond yields, which suggests significant declines in the QQQ are likely.

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