Tech stocks have been routed in the current market downturn and there could be more pain ahead for them.
What Happened: The order cuts implemented by most consumer electronics brands have only taken into account the impact of the Russian-Ukraine war on the demand from these nations, famed Apple, Inc. (NASDAQ:AAPL) analyst Ming-Chi Kuo warned on Thursday.
Kuo's comments came in the form of a tweet in Chinese, which he also made available in an English translation on Medium.
Not referring to any particular company, Kuo, an analyst at TFI Securities, said these brands haven't taken into account or are unwilling to admit, that there could be a more severe impact from other factors as well.
The analyst noted that a dent in consumer confidence, a rise in global inflationary pressure, the impact of the Ukraine war on the European economy and the COVID-19 lockdown in China due to the renewed outbreak of the pandemic will likely impact the demand outlook.
Non-accounting of impact from these factors would be the "most considerable risk" for tech stocks in the following months, he added.
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Why It's Important: If the geopolitical risk shows up in the P&L statements of tech companies, it could have ramifications for the broader market. Most indices are heavily-weighted with tech stocks and therefore they could potentially move the broader market in the direction they are headed toward.
Corporate profit growth has also been one of the drivers of positive sentiment among investors in recent years. If profit growth falters, risk-off sentiment will come into play, aggravating the market weakness further.
