“The technology sector is extremely broad and some tech companies are more robust than others. In the previous credit regime, tech companies could simply buy revenue growth because it could be financed very inexpensively.
Now that credit is tightening, this model is much less viable. Some tech companies will be able to weather this new credit environment, while others may not.
Investors should scrutinize the financials of any potential investment with a particular focus on inflation and tighter financing conditions. For example, companies with high-income accruals may underperform because the future value of their past sales decreases from inflation.
Tech stocks showing positive earnings and cash flow tend to be less volatile in a bear market.”