Tech stocks have been volatile for some time now and have recently suffered a massive selloff. Now, some analysts say they have been “dead wrong” about being overly bullish, particularly in light of the current macro environment. The war in Ukraine, the COVID-19 pandemic, a 41-year-high rate of inflation and tomorrow’s Fed rate hike decision all act as factors increasing market stress and volatility, including in the tech sector.

                By                    Yaёl Bizouati-Kennedy

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“We have been permabulls for the last decade on tech stocks, BUT clearly we have been dead wrong over the last few months in this massive sell-off.  The Fed hike cycle/risk-off mentality is creating a dislocation for high quality tech names. That’s our view, others will disagree,” Wedbush Securities analyst Dan Ives tweeted on May 1.

In April, the Nasdaq had its worst monthly performance since Oct. 2008, bringing its losses for the month to more than 13%, according to The Wall Street Journal. The WSJ added that the index is down 21% in 2022, its worst start to a year on record.

Cyber Security and Software May Bolster Some Tech Investment

In a May 2 research note, Wedbush analysts Ives and John Katsingris said that the magnitude and velocity of the sell-off in tech names has been surprising this year — and is a situation which is leading to a “bifurcated tech tape.”

According to Ives and Katsingris, this bifurcated tech tape will be driven higher by software, semis, cyber security and product-driven names, such as Apple. In terms of the cyber security sub-space, Wedbush picks include Palo Alto, Zscaler, Tenable, Fortine and CyberArk. 

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At the same time, against a slowing backdrop, some tech names “will be under the microscope for budget dollars and have business models skewed towards flush budgets with clearly tougher times ahead,” the analysts’ note continued. In relationship to this sentiment, Wedbush indicated it is downgrading its opinion of DocuSign to Underperform from Neutral. It is also downgrading its outlook on Matterport to Neutral from Outperform — as well as it’s forecast for C3.ai, to Neutral from Outperform.

Jeff Bezos Weighs In With What Could be a Warning

Gurley wrote: “An entire generation of entrepreneurs & tech investors built their entire perspectives on valuation during the second half of a 13-year amazing bull market run. The ‘unlearning’ process could be painful, surprising, & unsettling to many. I anticipate denial.”

Bezos tweeted back: “Bill is without doubt one of the smartest people I know and always worth listening to. Most people dramatically underestimate the remarkableness of this bull run. Such things are unstoppable … until they aren’t. Markets teach. The lessons can be painful.”