Tech Stocks Left Out of Rally Ease Fears a Bubble Is Building

-- To the bubble hunters, signs of excess aren’t hard to find, with cryptocurrencies roaring back and Nvidia Corp. surging nearly 80% since the year began.A $2 Billion Airport Will Test Modi’s Mission, Adani’s AmbitionsBut if there’s some irrational exuberance sweeping across Wall Street, it hasn’t trickled down to one of the most speculative corners of the US stock market: unprofitable technology companies.Twilio Inc.

“Profitless tech stocks’ declines indicates that this is not an AI-fueled bubble,” Kathryn Rooney Vera, chief market strategist at StoneX Group Inc.The market’s rise this year is fueling a growing debate over whether prices have run too far ahead of the economic fundamentals, and the advance has largely paused over the last two weeks as investors weigh whether the Fed will start cutting interest rates as soon as had been expected.

The recent dynamic stands in contrast to the pandemic’s stock-market frenzy, when low interest rates and a rise in day-trading pushed up the price of the most speculative assets, like meme stocks and special-acquisition companies. Goldman’s index of money-losing tech companies rose over 200% in 2020.

Some of this year’s best-performing stocks, such as Meta Platforms Inc. and Amazon.com Inc., have boosted profits by curbing spending and cutting jobs. Rather than speculative bets, Nvidia’s stock price reflects its currently surging earnings as others buy its chips for AI computing. By contrast, Tesla Inc., a pandemic-era darling that recently issued a disappointing outlook, has seen its shares tumble 34%.

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