Is There a Bubble Forming in Unprofitable Tech Stocks?

Shares of unprofitable technology companies have rallied sharply this year amid rising optimism that the U.S. will avoid a recession and that the Federal Reserve will soon end its interest rate hiking campaign.  A basket of unprofitable technology stocks tracked by Goldman Sachs has surged +43% since May, its best three-month performance since 2021 and more than twice the gains of the Nasdaq 100 Stock Index ($IUXX) (QQQ), raising concerns that a speculative bubble may be forming in the stocks.

The rally in unprofitable technology stocks has some analysts concerned about a potential selloff if fundamentals fail to keep pace with the bullish sentiment.  John Hancock Investments said, "The big sentiment-driven rally is rewarding the most speculative parts of the market, and if sentiment changes and investors take a renewed look at fundamentals, we think we would see an end to the rallies.”  John Hancock Investments also thinks this makes it a good time to take some profits.