2/16/2023

Welcome, everyone, to the latest debate. Tech names that were tossed aside in 2022 have a new lease on life, and yesterday's earnings are a prime example. Roblox spiked 26%. NerdWallet did, too. So on Valentine's Week, should investors love this growth tech rally or leave it? Jon Fortt is here to weigh in.

JON:

“Leave it.

I know it's hard for investors to see those charts going up and up every week while you've got money on the sidelines. By the end of 2022 you'd licked your wounds on your losses. You said you were done with that risky, unprofitable stuff. And now look at it! C3 AI was 11 bucks on January 3, now it's 25. Tesla has doubled off its lows of the first trading day of the year. So why leave it? Because the most important things about this economy and this market still haven't changed. Inflation is far from tamed, with the January consumer price index up 6.4%. The labor market is hot with more than a half million jobs added last month. And the names that have been rallying most are some of the riskiest. It's like in high school, where you could tell how a party was going to end by the mix of kids who showed up late. Virgin Galactic is up 70% for the year, and Bitcoin is back near 25K. The cops are breaking up this rager by 1 a.m. Leave it.”

It's not as if everything that's rallying is low-quality. And was abandoning tech the right move, anyway?

JON:

“On the other hand, there's a lot of treasure in this rally.

To understand it, you have to first admit that the 2022 growth tech selloff went too far. We'd gotten to the point where investors were openly saying to avoid tech, at the moment when we're standing on the cusp of an artificial intelligence-driven productivity revolution. So of course C3 AI popped this month, once investors realized AI is more than a buzzword, Microsoft can use it to challenge Google in search, and C3 has real customers like Baker Hughes and Raytheon. Or NerdWallet, which had just a billion-dollar market cap but did more than half a billion in revenue for the year, grew revenue 43% in Q4 and was GAAP profitable. Or Roblox, which delivered a beat on bookings and EBITDA 80% better than the street expected. And no, Roblox isn't profitable. But its model is working, and bookings are up 21%. It's not to say there aren’t trash stocks out there — there are — but there are interesting long-term bets, too.”

What do you think? Which side do you find more convincing, and why? Watch how it played out on Squawk Box below: