Tech stocks in the United States endured an astonishing rally in 2023, with the Nasdaq leading the charge and recording over 43% in returns. Although the beginning of 2024 was lackluster, the major indices have rebounded in recent weeks. The Nasdaq soared by 6.2%, while the S&P 500 surged by 4.9%. However, with the equities ascendng, an abundance of stocks appear to be flaunting lofty valuations.
Below, three tech stocks are identified as candidates for sale due to either overvaluation, significant growth risks, or a combination of both factors.
Tech Stocks to Sell: Qualcomm (QCOM)
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Stemming from intensifying competition in China, Qualcomm (NASDAQ:QCOM) confronts a tenuous long-term outlook. China’s technological powerhouse, Huawei, unleashed the Huawei Mate 60 Pro in September of the previous year, featuring a seven-nanometer system on a chip (SoC) engineered and produced in China, with a wireless modem that also achieved rapid 5G speeds. Evidently, Huawei phones persist in denting Apple’s sales.
Furthermore, Qualcomm is a supplier of chips used in modern vehicles. The expected slowdown in the electric vehicle market due to rising interest rates further undermines this segment’s short-term growth prospects. Despite the current uptick in QCOM’s shares, investors should remain cautious.
Apple (AAPL)
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Apple (NASDAQ:AAPL) has grappled with stunted revenue growth in recent years. In the fourth-quarter report for the fiscal year 2023, the company observed a 1% YoY revenue decline, an indication that the mobile handset market has reached saturation.
Another cause for investor concern lies in the uncertainty surrounding the Chinese market, which contributed to about 18.9% of Apple’s revenue at the conclusion of fiscal year 2023. The introduction of Huawei’s Mate 60 Pro led numerous Chinese consumers to favor it over the new iPhone amid geopolitical tensions.
While CEO Tim Cook celebrated an all-time high in Services revenue, investors should not anticipate robust share price appreciation unless Apple adopts a comprehensive and effective diversification strategy.
Tesla (TSLA)
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Tesla (NASDAQ:TSLA) unquestionably stands as a major player in the global electric vehicle market, additionally wielding a substantial influence in establishing the fundamental electric vehicle charging infrastructure, thus tackling the EV sector from multiple angles.
During 2023, Tesla performed admirably, surpassing expectations with its quarterly earnings, and the price-cut strategy initiated at the commencement of the year boosted quarterly deliveries while exerting pressure on gross margins. Tesla’s Q4’2023 financials also outpaced Wall Street estimates. Regrettably, CEO Elon Musk provided bleak guidance for Tesla and its shareholders, citing interest rates and feeble consumer demand.
Tesla is also grappling with mounting competition from China’s BYD, which overshadowed Tesla as the predominant seller of EVs in China for 2023. Elon Musk has expressed clear apprehension regarding the ascendancy of Chinese EVs and even highlighted that China’s EV players could “annihilate” their Western counterparts unless trade barriers were enforced.
Given these developments and the broader deceleration in the EV market, Tesla is a stock to divest from. The company is trading at 58.9x forward earnings and appears overly stretched in this volatile market.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
