Google, Facebook, other tech stocks retreat

Investors jettisoned shares of Google owner Alphabet, Facebook and other big tech companies Monday in a trading session marked by widespread selling.

Of the three major indices, the tech-focused Nasdaq Composite was the hardest hit — but not by much compared with the blue chip Dow Jones Industrial Average and the broad-based S&P 500 Index.

The Nasdaq fell 1.2 percent, the S&P 500 dropped 1 percent and the Dow declined 0.9 percent in midday trading on Monday.

Among the five largest Bay Area tech stocks on the SV150 Index by market value: Mountain View-based Alphabet, which owns Google, plunged 2.6 percent, Santa Clara-based Intel declined 1.4 percent, Menlo Park-based Facebook slipped 1.2 percent, Cupertino-based Apple fell 0.6 percent and Redwood City-based Oracle dropped 0.2 percent.

Rounding out the top 10 Bay Area tech stocks by market value: Santa Clara-based Nvidia was down 1.5 percent, Netflix tumbled 1 percent, San Jose-based Cisco Systems was down 0.6 percent and San Jose-based Adobe Systems was down 0.4 percent.

Foster City-based Gilead Systems was an exception among big tech stocks in the Bay Area and gained 0.2 percent.

“Some tech stocks are overvalued and some are undervalued,” said Jeffrey Elfont, president of Walnut Creek-based Pinnacle Capital Management.

President Donald Trump’s ban on travel from countries associated with terrorism isn’t the driving factor for the Monday selloff, Elfont said.

“The travel ban is not a sufficient reason for this downturn,” Elfont said. “It’s not enough.”

Elfont believes that some 1 percent to 2 percent pullbacks will occur from time to time, because technology shares appear to be approaching peak levels at their current valuations. Any hiccups in earnings results can jolt investors.

For example, Alphabet last week reported fourth-quarter of 2016 earnings of $9.36 a share, but analysts had been expecting $9.64. Revenue was better than expected, though.

Alphabet also said its fourth-quarter expenses of $8.76 billion were up 12.9 percent from a year ago. Costs of hardware, operating data centers and expenses related to acquisitions by YouTube were among the factors that drove up expenses in the fourth quarter, Alphabet executives told analysts on last week’s earnings call.

“Tech shares are fully valued, which means the economy has to reach 3 percent growth or 4 percent growth for tech stocks to have another big surge,” Elfont said. “People would have to start throwing away their tech devices every few months and buying new ones as replacements.”

 

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