Market Analysis

Why Are People Buying Overvalued Tech Stocks?

While tech stocks have done well since the coronavirus pandemic hit in 2012, they’re now trading for astronomical multiples of earnings. While tech companies aren’t bad businesses, the valuations are far too high. They need to cool down before they become viable investments again. The tech giants are worth billions, so it’s important to take their price tag into account. 

Despite their lofty valuations, many investors are still hesitant to buy tech stocks. A key reason for this is that many of these companies have not met their projections. They may have low growth prospects or poor customer service, but their current price can’t justify a high dividend yield. However, this doesn’t mean that tech stocks are bad investments. Some are simply too expensive. It’s all about timing.

The current value of tech stocks is based on their projected sales over the next few years. While the tech industry is booming, it’s also very risky. The S&P 500 and the FTSE 100 have returned incredible returns over the past decade. For example, the Nasdaq 100 has returned 733.3% in sterling terms. During this period, companies like Amazon, Alphabet, and Netflix have become megacaps. As a result, investors have to be careful when buying tech stocks.

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