Tech Stock Warnings: Why Super Micro, Dell, and Symbotic Are Ripe for a Sell-Off

Stocks to sell

Is the incredible run in tech stocks about to come to an end? Some analysts are warning that the market could be in a bubble, and that investors should be prepared for a significant market correction. Paying attention to which tech stocks to sell will be paramount for investors so they don’t lose out on the wave of recent successes.

There are certainly risks out there. Inflation is a concern, and the Federal Reserve may be forced to slow the pace of its anticipated rate cutting program if inflation stays above the bank’s target rate. In addition, geopolitical worries and a sharp economic slowdown in China are also worth monitoring.

However, for many tech stocks, there has been nearly unlimited momentum in recent months despite the dark clouds on the horizon. Investors should consider all three companies on this list current tech stocks to sell as they are up at least 100% over the past 12 months. It’s time to ring the register on these companies now before those gains fade away.

Super Micro Computer (SMCI)

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Super Micro Computer (NASDAQ:SMCI) has been one of this year’s most impressive stocks. Riding the surge in demand for artificial intelligence (AI) enabled servers, SMCI stock has run up hundreds of percent in recent months. As investors looked for AI names to buy in addition to Nvidia (NASDAQ:NVDA), Super Micro ended up being a big beneficiary.

Since the beginning of this year SMCI is up a whopping 265%. However, there’s a real chance that investors who hold onto this obvious AI play for too long will get burned.

The S&P 500 Index added SMCI stock to its member list earlier this month. Oftentimes, index inclusion can be tied to a short-term high in a stock price as shares are boosted by the passive money flowing into the stock. This, however, is often followed by a “sell the news” reaction as investors cash out on the positive news.

Doubling up on that effect, Super Micro Computer announced an offering to sell at least two million shares of its stock to the public last week. With the stock up more than 800% over the past year, it makes all the sense in the world to do a public offering now. But it’s also a clear sign that insiders seemingly think shares are fully valued here as well. Investors who have profited from SMCI should consider it one of their tech stocks to sell before they get burned in a correction.

Dell Technologies (DELL)

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Dell Technologies (NYSE:DELL) built its name selling personal computers. And while it still has a large consumer electronics business today, that’s not what has investors excited. Rather, Dell has made a major move in the AI arena as it is becoming a leading vendor for certain types of AI hardware.

DELL stock has surged since the company most recently reported earnings. In those earnings, Dell noted that it is enjoying rapid growth in its AI server sales division. Even with the big AI burst, however, Dell’s overall revenues fell 11% year-over-year (YOY).

Dell’s AI advances are certainly notable. But it’s a tiny fraction of the company’s overall business, and investors are giving Dell way too much credit given the broader context of the firm’s outlook. Morningstar’s William Kerwin agrees with that view. He believes DELL shares are worth $55 each, which would suggest that shares are about 50% overvalued today. If and when the AI story loses momentum, DELL stock could be in for quite a tumble.

Symbotic (SYM)

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Symbotic (NASDAQ:SYM) is an automation technology company. It works to develop and commercialize processes which create operating efficiencies in next-generation warehouses. Specifically, Symbotic’s systems work to automate pallet and case processing at warehouses and distribution centers.

Symbotic has a generous valuation, with a market capitalization of more than $25 billion. That’s a huge number for a company that generated just $1.18 billion of revenues in fiscal year 2023. To-date, Symbotic has also struggled to generate consistent profitability.

The company is also controversial. Last year, short seller Ningi Research blasted the company, saying it was overhyping its technology and that much of its revenues are tied to a questionable contract with Walmart (NYSE:WMT).

Given the high short interest in SYM stock, there is always the possibility of a short squeeze. However, like with Super Micro Computer, Symbotic recently took advantage of its highly-valued stock to sell five million shares to the public. This should expand the float and make a short squeeze much less likely.

On the date of publication, Ian Bezek did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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