Tech stock outlook: Sector is overvalued, vulnerable to rate shocks

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Tech stock outlook: Sector is overvalued, vulnerable to rate shocks
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The rally in tech is set to fade after a red-hot start to 2023, but investors should keep an eye on one key industry, analysts say

The sector at one point climbed 18% since hitting a low in October, finding fuel from an investing craze around AI, expectations the Fed may start cutting interest rates and a fall in Treasury yields. has picked up about 6% this year following last year's plunge of 33%.

The S&P 500 Information Tech sector recently traded around 22 times forward earnings, said Tunkel."Tech is not cheap anymore." "From an investor's standpoint, that's low-quality earnings. You got there not because you grew revenue but because you were able to cut costs…the question is, 'How long can you keep that up?," said Skordeles.

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