How Strong Will Technology Stocks Finish 2020?

3 signs point toward weakness

The NASDAQ has suffered a challenging couple of weeks, followed by a decent relief rally — some analysts think the worst of the correction is over. In fact, some argue the recent increase in corporate mergers may be a sign the stock market is still too cheap.

But are stocks too cheap? Not likely – I think the recent cash raise at Tesla and the even more recent Nvidia announcement (a proposed cash, stock, and future earnings deal to buy Arm from Softbank) are not signs of strength in the market. Rather they could be recognition companies recognize the wild over-valuation of their own stock. Leadership at these companies are smartly leveraging inflated valuations to further strengthen balance sheets with cash and assets before stock prices return back to earth.

Strengthening balance sheets in the current euphoric environment makes a lot of sense. The recent and sudden, sharp drop in large-cap tech stocks might finally be a sign that three major hurdles for the stock market are finally coming into focus.