Four reasons why tech stocks are falling

Yahoo Finance's Brian Sozzi lists the main reasons why tech stocks are struggling so much as of late.

Video Transcript

BRAD SMITH: Welcome back, everyone. Tech stocks have been getting punished so far this year, dragging the NASDAQ down to its worst month since 2008 in April. And in just the past three trading sessions, the world's largest tech companies lost more than $1 trillion in value. So why is this happening? And where do we go from here? And that's where we find Sozzi's Take today. Sozz.

BRIAN SOZZI: Yeah, a lot of these tech stocks have been absolutely obliterated. And we have a cool chart here, looking at some of the biggest names, losing a lot of value in the tech space. Of course, there I am, right in the smack of that really plunging stock price. You have Netflix, you have Okta, you have Align Technologies, PayPal, Lucid, really names that a lot of investors bought up last year and have continued to ride down. So first, let's break down why you are seeing, in fact, seeing these selloffs. I'll even add Coinbase to that list now, too.

Look, you have to realize that a bubble has, in fact, popped inside the tech space. And you also have to realize that sales and profits are slowing really to a large degree here across the board in tech. And it's not just Meta. It's not just Google. We talked about Unity earlier on in the show. Roblox, their growth rates are slowing. And then lastly, here, tech execs, I think they still do not understand they're operating in a new environment.

So we're hearing a lot of these executives get on these earnings calls and just not read the room, read Wall Street correctly, that they have to probably be cutting back expenses, pull back on some of these pipe dream type investments and adjust their businesses for the new reality they are, in fact, facing. So this is why some of these things are happening. Of course, every company is a little different. But still, I synthesized it down to these. And then now what? As an investor, we saw a lot of new investors come into this market last year, buying a lot of these interesting, buzzy, tradeable tech stocks.

And first thing, my first hot tip here is, don't panic, and do your research. I know it sounds lame to say don't panic and don't be worried, but it's tough when you are a new investor, and you're sitting on 50% losses or 70% losses like Netflix, you get worried. Your net wealth is getting evaporated in real time. But don't panic because that is when you tend to make really dumb decisions. Now at the end of the day, Netflix shares might be down today, but it's still a very good business that is not going anywhere anytime soon. This is not Sears we're talking about.

And the next and last but not least, now's a good time to double down on your research. Go back to see why you fell in love with these companies originally. And if something's changed, act accordingly. If not, perhaps you look to invest more in the company.

JULIE HYMAN: Or you can just buy the SPY and not do any research and just hang out for--

BRIAN SOZZI: Or you could do that.

JULIE HYMAN: --20 years.

BRIAN SOZZI: Or you could do that.

JULIE HYMAN: Stocks go up over time.

BRIAN SOZZI: And maybe add some Berkshire to it.

JULIE HYMAN: Right? You know, I mean, over time, it is much more difficult to--

BRIAN SOZZI: That's no fun. Don't you want to trade in and out of the market, try to hit some homeruns?

JULIE HYMAN: I've been doing this for so long that I want to do anything but to that. That might be the one thing that I've learned, Brian Sozzi. And I think we have to emphasize the first point that you made there, is the reason behind this, right? Is that none of those other things mattered as long as there was a lot of liquidity in the system and looking-- thirsty cash, as I put it at one point, looking for a home. And it was finding a lot of homes and not being as discriminating.

BRIAN SOZZI: Well, the backdrop for investing is changing. And it has changed in a very big way. Interest rates are going up. So that easy way to make money, which was, in many respects, some of those tech names that we were showing earlier on, that dynamic is now changing. And now you have to really double down on your research, understanding companies, talking to executives if you want to make some money.