Tech Stocks Are Due for Another Fall

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Technology fundamentals are getting worse, not better. One example is weakening demand for consumer electronics.

Illustration by Barron’s (Dreamtime 4)

For years, tech investors seemed to outrun every bit of trouble, like the Road Runner in the old Looney Tunes cartoon. But this summer, tech buyers have changed roles. Suddenly, they look more like Wile E. Coyote, the Road Runner’s flailing pursuer. Wile would always make headway running off a cliff through the air, but after a certain point he would look down and realize his poor predicament. Gravity would take hold, and Wile would suffer a painful fall.

Since a June low, technology stocks have soared, with the Nasdaq Composite index up 20%. But the classic Looney Tunes cartoon offers a lesson to investors. Reality eventually matters.

The sustainability of any rally led by triple-digit percentage gains from money-losing firms like

Coinbase Globa

l (ticker: COIN) and


(FUBO) is suspect. More important, the latest developments show business trends in the technology sector could be getting worse, not better, suggesting a rough ride ahead for shareholders.

The weakness in consumer-oriented end markets including PCs, electronics, smartphones, and digital internet advertising has been well chronicled. We’ve seen big warnings from major suppliers, and the pricing for computers, processors, memory chips, and graphics cards continues to drop every day. There is no sign of a quick turnaround in these markets.

But the bigger problem now is that the slowdown seems to be spreading to the one place that has held up relatively well:…


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