Famous analysts warn: The tech bubble is approaching a "critical point," beware of large hedge funds selling off

As 2024 is about to end, technology stocks continue to provide "firepower" for the U.S. stock market. However, recently, analysts have warned that the tech bubble in the U.S. stock market is approaching a "critical point," and a large-scale sell-off by hedge funds may be imminent...

Recently, Steven Jon Kaplan, CEO of the True Contrarian blog and newsletter, reiterated his "contrarian bet" on tech stocks. Although his predictions have not yet materialized, he insists that the tech bubble in the U.S. stock market is now larger.

Kaplan has successfully predicted several sell-offs in tech stocks in recent years, with his "notable moments" including recommending buying during the pandemic sell-off in 2020. In April of this year, he predicted that the Invesco QQQ Trust Series QQQ, which tracks the Nasdaq 100 index, would fall to 300 points within a year and below 100 points within three years.

Currently, QQQ is at 529.96 points, indicating nearly a 50% decline potential by next April.

Kaplan expressed concern that corporate profit expectations are too high, and there is increasing evidence that spending by large tech companies on artificial intelligence has not yielded substantial profits. He also stated:

"Large hedge funds may begin to sell off, as these funds account for a significant portion of the daily trading volume in tech stocks. Currently, most hedge funds follow an algorithm that states if stocks like QQQ drop by 20%, those funds worth trillions of dollars will sell off simultaneously."

Kaplan warned that the first wave of sell-offs could occur if QQQ drops to 360.

Moreover, this year, insiders from companies including Nvidia, Microsoft, Apple, and Walmart have engaged in selling activities. Kaplan pointed out that these insider sell-offs reached a historical high in July, slightly decreased in August, but again hit a historical high in November and December:

"This is a very large amount, and it has already spread from large tech stocks to many other components."

Notably, Kaplan has invested his funds in the iShares 20+ Year Treasury Bond ETF (TLT), which has fallen from $180 in March 2020 to its current price of $87.87. He stated that only when investors begin to see losses in the stock market will there be a possibility of large-scale inflows into TLT.

Additionally, Kaplan warned that the current bear market may have already begun and predicts that the next round of the bear market will bottom out in the second half of 2027, after which another strong bull market will commence. He also mentioned that a rebound may occur before that:

"A rebound may occur in the summer of next year, followed by another decline. After the market crash, large tech stocks and well-known stocks may perform well. It is recommended to focus on market winners from 2002 to 2007, including emerging markets, gold mining stocks, commodity producers, and small to medium-sized enterprises, rather than large stocks."