- This year’s hottest tech IPOs, including Rivian, Affirm and Roblox, hit the market on Monday.
- The tech-heavy Nasdaq also plunged into the negative.
- There’s no clear reason for the sell-off, but stocks that had some of the biggest rallies this year are feeling the pinch.
Some of the hottest tech IPOs of the year, including Rivian, Affirm and Roblox, fell on the market on Monday, as the tech-heavy Nasdaq plunged into the negative. Meanwhile, the S&P 500 and Dow Jones Industrial Average remained positive, a sign that investors are turning away from the tech industry.
While there is no clear reason for the sell-off, stocks that have had some of the biggest rallies this year are feeling the pinch. Affirm, which has seen rapid stock growth amid its new partnership with Amazon, fell 7% in afternoon trading. Roblox, which benefited from growing interest in the metaverse, was down about 9%.
The sell-off at electric vehicle-maker Rivian, which had ahead of Ford and General Motors since its market debut and was slated to rival Tesla, continued on Monday. Its stock dropped more than 12% as investors continue to take profits.
Fear of higher interest rates, which usually mean a reduction in expected earnings growth for investors, can be a contributor to the sell-off. Still, President Joe Biden on Monday nominated US Federal Reserve Chairman Jerome Powell for a second term and the first Fed rate hike is not expected until the summer of 2022 at the earliest.
Amid potential hikes in rates, analysts at Goldman Sachs in a November 19 note urged portfolio managers to focus on “growth stocks with advanced current profitability” and fast-growing firms valued solely on long-term growth expectations. urged to stay away.
“We recommend that fast-growing firms be valued solely on long-term growth expectations, which will be more vulnerable to rising interest rates or the risk of disappointing revenues,” the analysts wrote. “Conversely, growth stocks with advanced current profitability have comparatively shorter durations, and are therefore less exposed to the risk of rising interest rates.”
Some of them cited by technology companies with higher profitability and faster expected revenue growth include Palantir, Zoom, Meta and Alphabet.
Some of the biggest IPOs of 2020 are also being impacted. Posture fell nearly 20%, and DoorDash and Airbnb both sank 7% on Monday afternoon.
Earlier this year the rotation of tech stocks underperformed cloud stocks like Fastly and Snowflake as investors moved to financial and commodity stocks that typically outperform during periods of inflation. On Monday, both the stocks were down 5% and 7% respectively.