Sometimes it looked as if the technology bubble was about to burst again. Stock markets are falling as investors are selling tech stocks amid the COVID-19 pandemic.
Some advanced technologies power the stock market. CNBC’s Jim Cramer said that more than two-thirds of the companies that make up the S&P 500 were well below the peak in February. We are all trapped in the tech bubble. If any large technology company gets into trouble in any way, the entire market development will collapse rapidly.
But, to be fair, what options do investors have today? As interest rates and bond turnover approaches zero, investors are forced to seek returns from stocks. The fact is that even if the technology sector is already in a giant stock market bubble, momentum alone can still push prices up a lot before they reverse.
Even in late July, SoftBank invested billions of dollars in fast-growing technology stocks-this may be the point. Why can’t a large company like SoftBank find a better way to redeploy cash than invest in overpriced technology stocks?
If this is the case, there are currently no other attractive options to enter due to the current pandemic. Amazon and Tesla are two investors you should think deeply about. You can also check out Jeff Brown’s Tech Melt. For more inside information and review, check this No BS IM Reviews blog post.
Amazon’s performance in the second quarter left a deep impression on everyone. Due to the continued increase in sales during the pandemic, it exceeded all analysts’ expectations. There is no doubt that these stocks will keep increasing in value in the future.
Amazon is beginning to see more and more large competitors, such as Walmart and Costco’s online competition. Both companies are rapidly expanding their online businesses due to this pandemic. Besides, due to increased competition from Microsoft and Google, Amazon’s AWS division’s growth continues to slow. Amazon’s AWS department’s second-quarter performance was below 30% for the first time.
On the other hand, since the acquisition of Whole Foods in 2017, Amazon has begun to gain a foothold in grocery stores. Amazon Go seems to be an exciting investment in automation. The grocery store operates autonomously, and hardly any employees are required at the grocery store. It’s an exciting development that is currently unmatched unless, in the future, other large competitors such as Walmart can develop their own ways to speed up and simplify the shopping process.
Obtaining a license for such technology on Amazon in the future may be a great source of income. People have become accustomed to the pandemic, and the government is also unwilling to implement a lockdown again. Amazon may see customers return to physical stores to shop.
Just a few months ago, people were afraid to leave home because of COVID-19. Today, almost all kinds of restaurants and shops are open, and people are everywhere. We don’t know how much spending will shift from Amazon to the broader economy in one or two quarters. But we assume that Amazon will maintain the sales growth rate experienced in the worst weeks of the pandemic.
Amazon has been the foremost provider during the epidemic, after all. If investors think that further work interruptions or shelters will be in place, Amazon may find itself overwhelmed again. However, you should not expect the government to shut down any more facilities forcefully. The government has lost the courage to spend limitlessly for an unknown period.
Amazon quickly gave up 25% of its value in the past 2000 stock market bubble. Its value was much higher. It might happen again soon since Amazon’s price has risen sharply in the latest rally since the March market crash.
As mentioned above, investors have reason to argue that Amazon may still benefit from the ongoing pandemic.
What about technology companies that may not get help from the epidemic? What about companies that are not currently part of the Standard & Poor’s Index and therefore, have not benefited from index purchases? What explains Tesla’s more remarkable growth?
The pandemic closed Tesla’s most productive factory during the Nevada pandemic closure. Tesla is expected to provide 500,000 vehicles by the end of 2020. In the second quarter of 2020, it is only 25 percent more than Ford. Tesla is undoubtedly a long-term breakthrough and the first company to bring a high-quality electrical product to the market in many years. It is much more than just a car company. It is also an energy storage and solar energy company.
However, the share price continues to rise. 126% up in only six months with absolutely no relevant news unless you think stock splitting creates value. It looks like these stocks are headed for an epic correction should the technology’s stock bubble suddenly burst.
Can Tesla rise to $3,000 per share in the short term? Of course, why not? Don’t be shocked to see it fall to $500 per share. Elon Musk himself announced that the stock was overvalued, returning to below $800 per share. Tesla’s stock price now exceeds $2,000 per share. Some investors are pursuing long-term growth stories. Some speculators are taking advantage of the momentum.
Either way, the stock bid far exceeds the “reasonable” valuation.
Likewise, it is not easy to argue with the company’s long-term prospects. However, investors believe that Tesla can currently justify a price close to $2,000 per share. When the market finally improves, expect this stock to trade below $1,000.
Seek professional advice before making any investment decision.
Retail investors will have to ponder over whether they believe the technology’s names are still an opportunity for the future or merely the last refuge from a widespread stock market reversal. But investors should not wait too long to make a decision. It’s worth remembering if technology is in the middle of a stock bubble. After a span of time all bubbles will come to an end. And, like a tsunami, there can be a sudden reversal with little or no warning.