Some of the tech firms’ stocks that emerged as giants in their initial public offerings (IPOs) saw a dive as the week started on the 22nd of November.
Also, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) declined over 1% as the S&P 500 (INDEXSP: .INX) plummeted closed with a loss. On the other hand, Dow Jones Industrial Average (INDEXDJX: .DJI) remained positive. The encouraging state of the DIJA shows that investors are gradually taking a turn away from the tech space. Let’s take a closer look at tech stocks around Wall Street.
Tech Stocks with Impressive IPOs Record Losses
Notably, tech stocks with significant jumps following hot IPOs this year were partakers of the fall. Some of which are automotive technology company Rivian (NASDAQ: RIVN), Roblox Corporation (NYSE: RBLX), and Affirm Holdings (NASDAQ: AFRM).
Some of the biggest 2020 IPOs are also feeling the heat. Airbnb (NASDAQ: ABNB) shed 7%, Asana (NYSE: ASAN) fell nearly 23%, while DoorDash (NYSE: DASH) sank 6%.
Affirm, which has been surging amid its recent partnership with Amazon (NASDAQ: AMZN), dropped over 9%. When Affirm and Amazon partnered in august, AFRM stock spiked a whopping 40%. Following the Monday loss, however, Affirm is now down 0.82% to $122.50 in after-hours trading. The company has also plunged more than 16% in the last five days and another 22.83% over the past month.
Despite pulling some gains from the growing interest in the metaverse, Roblox also closed down nearly 11%. As tech stocks continue to record losses, Roblox is down, trading at $117.68 in extended trading hours. The current trading price is a 2.11% loss over its previous close of $120.22.
Furthermore, Rivian shed about some 8% on Monday. Investors continue to take their profits after the carmaker was valued over Ford Motor Company (NYSE: F) and General Motors Co (NYSE: GM) following its market debut. Also, Rivian is considered a rival to EV giant Tesla Inc (NASDAQ: TSLA).
Possible Higher Interest Rates
The continued sell-off across these tech firms could be due to the fear of higher interest rates. Generally, growth in interest rates would result in a decline in expected earnings growth. Analysts at investment banking company Goldman Sachs have commented on the possibility of rate hikes. In a note on the 19th of November, the analysts encouraged portfolio managers to focus on “growth stocks with elevated profitability.” The investment banking company further advised portfolio managers to avoid fast-growing companies that are wholly valued on long-term growth expectations.
In the note, the analysts stated:
“Our recommendation is to avoid fast-growing firms valued entirely on long-term growth expectations, which will be more vulnerable to the risk of rising interest rates or disappointing revenues. In contrast, growth stocks with elevated current profitability have comparatively shorter durations, and therefore are less exposed to the risk of rising interest rates.”
It appears investors are neglecting tech stocks for financials and commodities stocks which perform better during inflations.
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