July 12, 2024

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3 Overvalued Stocks That Could Plunge if the Market Crashes

2 min read

Nervous bohemian with laptop in cafe

The stock market was due for a rebound in 2023. The inflation crisis that started in 2021 led to a disastrous 2022, where the S&P 500 (SNPINDEX: ^GSPC) market index fell by 19.4%.

And 2023 has delivered a powerful recovery. The S&P 500 is up more than 23% year-to-date, lifted by a stabilizing economy and the raging artificial intelligence (AI) mania.

I saw 2022 as a buying opportunity, where lots of high-quality stocks were available at paltry share prices. The tide has turned, and Wall Street is no stranger to overvalued stocks today.

Let me show you a couple of stock tickers teetering on the edge of a meteoric plunge. Mind you, they could continue to rise in 2024 and beyond if everything works out as planned. It would be silly to sell any of these skyrocketing market darlings short, and I’m not saying that you need to zero out your holdings. But it’s a long way down from these lofty heights, and even a small misstep or accident could result in dramatic haircuts at the drop of a hat.

So please be careful with IonQ (NYSE: IONQ), Nvidia (NASDAQ: NVDA), and Marathon Digital Holdings (NASDAQ: MARA). These stocks have gained 235% or more in 2023 and trade at astronomical valuation ratios.

Hold them if you like, buy more if you must, but be prepared for gigantic potholes in the road to long-term gains. The next sharp turn could very well be painful. Here’s why I think you’re better off waiting for a price correction before slapping that “buy” button.

MARA ChartMARA Chart

MARA Chart

What are these companies doing right?

The skyrocketing stocks under my microscope are up for good reasons.

  • Nvidia emerged as an early leader in the high-powered microchips required to create and run modern AI systems such as OpenAI’s ChatGPT.

  • IonQ has started to monetize its research in quantum computing, potentially paving the way to tremendous revenue streams as the technology matures.

  • And Marathon’s all-in bet on Bitcoin (CRYPTO: BTC) may have looked misguided in the recent crypto…

2023-12-20 14:27:00

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