One merciless reality the inventory market confirmed this previous week is that making an attempt to choose the underside for know-how shares is a idiot’s errand. The Nasdaq Composite’s horrible September—it was down 10.5% on the month—has made the bottom-fishing that came about over the summer season look ill-advised. As I’ve famous earlier than, the primary downturn in tech earlier this 12 months was all about valuations. This new part of the decline is all about softening earnings. In relation to price-to-earnings ratios, the market is working right into a denominator downside.
The market downturn, the weaker financial system, and the reversal of some pandemic-era tendencies have uncovered weaknesses within the enterprise fashions of corporations comparable to
Peloton Interactive
(ticker: PTON),
Zoom Video Communications
(ZM),
Shopify
(SHOP),
Affirm Holdings
(AFRM), and
Snap
(SNAP), and traders have adjusted valuations accordingly. However there are nonetheless some highly effective underlying secular tendencies that ought to ultimately drive tech shares greater. Traders with very long time horizons and robust stomachs may contemplate inching into the market. I’ve a number of concepts on the place to look.