The Nasdaq 100 index surged to a record high of $22,220 in February and then suffered a harsh reversal to a low of $20,500 last week. This retreat happened as concerns about Donald Trump’s tariffs and after NVIDIA published mixed financial results.
Jeremy Grantham, a Wall Street legend who founded GMO, has warned that the US stock market was in a bubble that may bust soon. If his view is correct, there is a likelihood that it will hit several companies in the Nasdaq 100 index. Grantham said:
“I’ve always looked at it from the point of view that the longer and the bigger and the higher it goes, the more exciting and dangerous it will be, and this has moved up the rank of super bubbles.”
Nasdaq 100 index has formed 2 bearish patterns
There is a likelihood that the Nasdaq 100 index will crash in the coming days. It initially formed a rising wedge pattern, a popular bearish reversal sign in the market. This pattern is made up of two converging ascending trendlines.
The Nasdaq 100 index has also formed a double-top chart pattern with a neckline at $20,585. A double-top is one of the most bearish patterns in the market. It has also dropped below the 50-day moving average.
Therefore, the index will likely plunge as sellers target the next key support at $18,200, the 50% Fibonacci Retracement point, which is about 13% below the current level.
Read more: Jeremy Grantham: the ‘Great Crash’ is about to repeat itself
Top Nasdaq 100 stocks to sell
Some of the top Nasdaq 100 index stocks to sell if Jeremy Grantham’s bubble warning are correct are Tesla, AppLovin, and Doordash.
Tesla (TSLA)
The Tesla stock price has crashed by over 40% from its highest level in January this year, and is hovering near its lowest level since November 7. The crash happened as signs emerged that the company’s business was slowing, with Tesla’s European vehicle sales plummeting.
Tesla is facing competition in other countries, especially in China, where local brands like Nio, BYD, and Li Auto are doing well. Also, it is unclear whether its robotaxi business will take off as Elon Musk has pledged. Additionally, Elon Musk, Tesla’s CEO has become distracted with the Department of Government Efficiency (DOGE).
Therefore, these factors mean that the Tesla stock price may continue falling as sellers target the key support at $200.
Read more: Tesla stock price forecast: 4 reasons TSLA is imploding
AppLovin (APP)
AppLovin stock price has also crashed from the year-to-date high of $528 to a low of $320 as concerns about its valuation rose. It is still a top Nasdaq 100 index stock to sell because of its valuation and the fact that some Wall Street firms have accused it of being a fraud.
The key reason to sell AppLovin is that it is one of the most overvalued companies in Wall Street. It has a forward price-to-earnings (PE) ratio of 50, higher than the sector median of 28. AppLovin stock also has a forward price-to-free cash flow ratio of 36, much higher than other companies.
Read more: AppLovin stock price crashes as we predicted: what next for APP?
Doordash (DASH)
Doordash is another top Nasdaq 100 stock to sell because of its valuation concerns. It has already surged by over 62% in the last 12 months, becoming a highly overvalued company.
Doordash has soared as it became a big player in the food and grocery delivery industry, where it competes with the likes of Uber and Instacart.
While Doordash has a strong market share, the stock has a forward P/E ratio of 41 and a forward EV-to-EBITDA multiple of 28, higher than the sector median of 10. Therefore, the Doordash stock price may retreat soon.
Other Nasdaq index stocks to sell
The other top Nasadq index stocks to sell as Grantham warns of a bubble are T-Mobile, Take-Two Interactive, Cisco, and Costco Wholesale.
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