Tim Bichara

Technology stock prices face a sudden drop

Last week saw the US stocks taking a dive, with share prices on big companies such as Facebook and Twitter seeing a drop-off of between 20-40% as reported by Bloomberg.

“U.S. stocks fell, pushing the Nasdaq 100 Index to its biggest three-day retreat since 2011 and erasing the year’s gains in the Standard & Poor’s 500 Index, as technology shares extended last week’s selloff.”

So what caused this sudden drop in stock prices? There’s a whole plethora of reasons that could have been attributed to it, ranging from concerns about the conflict in Ukraine, to China’s slowed economic growth.

The main contributor to the sell-off however seems to be due to concerns that share prices for many of the big technology companies are overvalued, thus investors start selling their shares before the price drops, in turn dropping the price of shares.

So will we have another market crash on our hands soon? While the figures aren’t promising, we doubt it’s going to get bad enough to knock everyone into another recession.

As Kevin Caron, the market strategist at Stifel Nicolaus & Co said: “The market, having had a very sharp rally last year, is set to consolidate some of those gains and that’s what we’re seeing here. It’s going to be a tug of war between valuations and the data from here on out.”

This could mean an end to the technology boom we’ve been enjoying. On the bright side however, it looks like the market is stabilizing.


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