Tech stocks left out of rally ease fears a bubble is building

Twilio, the maker of communication software, and cybersecurity company SentinelOne are among those that have tumbled this year even as a rally in the biggest tech companies pushed the Nasdaq 100 and the S&P 500 to fresh all-time highs. Both have dropped more than 70% from their peaks in 2021, when the Federal Reserve's easy money policy was fueling big gains in virtually everything.

They're not just outliers: An index of money-losing tech companies tracked by has fallen 18% this year and is on track for its worst quarter since mid-2022.

The slide indicates there's a limit to the optimism that has raced through for much of this year. That, in turn, is providing support to those on Wall Street who see rational forces at work - like solid earnings and artificial-technology breakthroughs - not a bubble that's poised to burst. Instead of being pulled up along with the industry's Goliaths, the money-losing tech companies have been punished by profit-focused investors and elevated interest rates that are still weighing on growth-stock valuations.

"Profitless ' declines indicates that this is not an AI-fuelled bubble," Kathryn Rooney Vera, chief market strategist at StoneX Group.

The market's rise this year is fuelling a growing debate over whether prices have run too far ahead of the economic fundamentals, and the advance has largely paused over the last two weeks as investors weigh whether the Fed will start cutting interest rates as soon as had been expected. Much of the gains have come from big tech companies poised to benefit from AI.