If you’re researching which tech stocks to sell now, look no further. Tech stocks are rallying once again. Despite a series of macroeconomic headwinds, traders have come rushing back to the tech sector. There’s been a particular focus on the largest companies out there, as the tech giants look like safe harbors right now. But that safety comes at a high price. For these three tech stocks to sell today, valuations have gotten far out of hand. Particularly in a world of higher interest rates, this isn’t the time to be overpaying for large-cap tech stocks such as these three.
Tech Stocks to Sell: AMD (AMD)
Bears love to pick on Nvidia (NASDAQ:NVDA). That chip company has blasted off in 2023 thanks to artificial intelligence ( ) developments, but Skeptics claim it’s all a big bubble set to pop.
That may or may not be true. Time will tell. What is clear, however, is that Nvidia is making good of the AI opportunity while it lasts. Specifically, Nvidia grew revenues 101% year-over-year last quarter. It’s not Nvidia that is the real AI bubble stock, rather it’s AMD (NASDAQ:AMD).
While Nvidia is doubling the size of its business thanks to AI innovations, AMD grew revenues a meager 4% last quarter. And it is barely profitable, bringing in a puny 18 cents per share of earnings last quarter.
AMD is trying to keep investors excited with the possibilities of its own AI chips set to launch in coming months. But details have been scarce about who the main customers will be for these products. Long story short, Nvidia won the rush to the AI market and left AMD in the dust. Meanwhile, AMD stock is selling for about 45 times forward earnings, which is a rather lofty level. Consider adding it to your list of tech stocks to sell now.
With the recent rally, AAPL stock is now back to almost 30 times forward earnings. This for a company that is expected to grow revenues less than 4% in fiscal year 2024.
That valuation simply doesn’t make sense in a time when interest rates have gone up so dramatically. You need some pretty serious growth to justify 30 times earnings in today’s marketplace. Apple, by contrast, is a mature company that barely grows and could even see earnings decline in a recession or if issues develop with key overseas markets.
Apple has relied on share buybacks to juice EPS growth in recent years. But as the valuation goes up, the buyback becomes less effective in terms of reducing the share count. And Apple’s paltry 0.5% dividend yield isn’t enough to warrant holding AAPL stock at this time either. You might consider getting out before it’s too late.
Graphics software company Adobe (NASDAQ:ADBE) has been on quite a run. Shares are up more than 80% over the past year, and nearly 1,000% over the past decade.
Adobe has become a prime example of how a software company can evolve from selling one-time licenses to being a recurring subscription revenue powerhouse. By getting folks to pay for Adobe’s software offering every month, Adobe has made itself a far more attractive and predictable business.
But traders have gotten carried away. ADBE stock is currently going for more than 50 times trailing earnings. And I’m skeptical how fast the company will continue to grow as it is already a mature offering that has raised prices dramatically; Adobe has already harvested the easy pickings here. In addition, generative AI could disrupt Adobe’s business model in unforeseen ways. Adobe is a good company, but not a good investment at today’s prices. That’s why it’s among the tech stocks to sell now.
On the date of publication, Ian Bezek 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.