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Yahoo! Inc. (YHOO)’s Alibaba IPO Could Signal the NASDAQ’s Peak as Analysts Warn to Trim Tech Exposure

Yahoo! Inc. (NASDAQ:YHOO) is a major factor in the upcoming Alibaba IPO, which is being celebrated as potentially the biggest in U.S history, at as much as $23 billion. However some analysts are warning that the record IPO may end up being the straw that breaks the camel’s back; the camel in this case being the NASDAQ composite index. As Auerbach Grayson Global Technical Strategist Rich Ross warned on Yahoo! Finance yesterday, it is time to limit your exposure to tech stocks as the NASDAQ approaches the record levels it achieved before the tech bubble burst in 2000. 1

“Yes, we did punch out to 5,100 in that big exhaustive blow off top back then which ultimately signalled the top. I don’t think we get there. I think there’s enough concern here around the 4,700 level that if you’re fortunate enough to have made some money along the way, please pull back your exposure to technology, please trim some of those gains if you can, once again as we approach that record monthly close of one of the biggest bubbles in financial history,” Ross said.

The NASDAQ’s rise to those record highs is completely different however, with the index having jumped more than 300% in the span of about 18 months during the tech bubble, while it’s achieved far more moderate growth leading up to this point. The index is up just 9.6% year-to-date, and a little over 20% for the past 12 months. Still, there are concerns that there simply isn’t enough liquidity for the index to absorb the IPO without affecting it as a whole.

Yahoo! Inc. (NASDAQ:YHOO), which has a 22% stake in the Chinese e-commerce giant has enjoyed healthy gains over the past month, up more than 14% as it’s slowly come to light just how much Yahoo! Inc. (NASDAQ:YHOO)’s stake in the company may be worth, and that this value was not properly reflected in their stock price. Alibaba’s market cap could be as high as $160 billion, making Yahoo! Inc. (NASDAQ:YHOO)’s stake worth more than $31 billion.

Disclosure: none

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