By CCN Markets: Goldman Sachs issued a dire warning about U.S. tech stocks last weekend. Their valuation premiums are at historic highs. Add the potential threat of U.S. regulatory interventions, and Goldman sees a bear market ahead for tech.
In an investor note Friday, Goldman’s chief U.S. equity strategist, David Kostin, admonished clients about the risks facing tech stocks:
“Rising market concentration and the political landscape suggest that regulatory risk will persist and could eventually weigh on company fundamentals. The valuation premium for growth is elevated today relative to history; Software in particular now carries the highest multiples since the Tech Bubble.”
Goldman is Playing Both Sides of The Fence
David Kostin cautions the valuation premium for revenue growth in tech stocks reveals a bubble. But as Goldman’s own data show, these valuation multiples were hardly any different last October–– when Kostin defended tech stock valuations to investors:
“Popularity has turned into concerns of overcrowding and outperformance has turned into concerns of overvaluation. We believe these risks are overstated.”
Furthermore, software companies like Alphabet, Adobe, and PayPal are among Goldman’s favorite stocks in its portfolio in 2019.
Goldman is Long FAANG
Amazon’s dominance of voice assistants through Alexa promises a very profitable future. Goldman Sachs projects compound annual revenue growth (CAGR) of 21 percent over the next three years.