With the accelerated pace of digital transformation and unabating hybrid working trends, businesses are investing significantly in technology upgrades. Also, tech trends are expected to dominate the market next year. So, while this should benefit most technology stocks, a few are already trading at lofty valuations despite possessing relatively weak growth prospects. For example, we think Snowflake (SNOW), Cloudflare (NYSE:NET), and MongoDB (NASDAQ:MDB) look significantly overvalued at their current price levels and could witness a pullback soon. So, they are best avoided now. Read on.Due to continuing digitization worldwide, experts predict that tech trends should dominate the market next year. Furthermore, as companies across industries invest significantly in technology upgrades, the tech industry should continue to thrive.
Continuing advancements in the tech space should further propel the industry’s growth. Investors’ interest in the technology industry is evident in the iShares Global Tech ETF’s (IXN) 32.6% returns over the past year versus the SPDR S&P 500 ETF Trust’s (SPY) 27.3% gains.
But although the industry has been one of the top-performing industries this year, not all tech stocks are expected to continue advancing in price Snowflake Inc. (SNOW), Cloudflare, Inc. (NET), and MongoDB, Inc. (MDB) are currently trading at price levels that are not consistent with their weak growth prospects. So, we think it could be wise to avoid these overvalued stocks now.