To The Moon

The problem isn’t just inflation. It’s the possibility that interest rates stay higher for longer just as investors are questioning expensive tech valuations.

September’s US CPI rose to 3.7% year over year, up from 3.4% in August and above the 3.6% expected by economists. Core CPI also increased to 2.6% year over year, suggesting price pressures aren’t limited to energy. Following the report, the Nasdaq Composite fell 1.88%, while the S&P 500 dropped 1.11% on October 14. 

So, what does this mean for tech investors?

🔍 1. Higher rates change how investors value growth

Technology companies often derive a significant part of their valuation from profits expected years into the future. When interest rates rise, those future earnings become less valuable in today’s terms.

This doesn’t mean every tech company is overpriced. Businesses with strong cash flow, healthy balance sheets and sustainable earnings growth may be better positioned than companies relying on distant future profits.

🤖 2. AI demand can remain strong while AI stocks fall

This is an important distinction.

Demand for AI infrastructure, chips and data centres may continue growing. But even a promising industry can experience a share-price correction if investors have already priced in years of strong growth.

If financing costs rise and investors become less willing to pay premium valuations, AI-related stocks could face pressure even without a major deterioration in business fundamentals.

A good business and a good stock price are not always the same thing.

💰 3. Should investors rotate into value stocks?

Value stocks may offer an alternative to expensive growth stocks, particularly businesses with established earnings and reasonable valuations.

However, value doesn’t automatically mean safe. Banks can face credit risks, consumer companies can struggle with higher costs, and energy stocks can be sensitive to commodity prices.

Rather than switching everything from tech to value, investors can compare companies based on valuation, cash flow, debt and earnings resilience.

📊 4. What would I watch next?

Three signals matter most:

• Inflation: Does CPI begin to cool, or do rising energy and service costs keep pressure on prices?

• Treasury yields: Do bond yields remain elevated, putting further pressure on growth-stock valuations?

• Earnings guidance: Can companies deliver enough earnings growth to justify their current valuations?

If inflation stays persistent while earnings expectations weaken, the correction could deepen. If earnings remain resilient and inflation moderates, the market may find support.

🎯 My takeaway

I wouldn’t judge the entire tech sector by one inflation report. But I also wouldn’t ignore what the market is signalling.

This is a reminder to distinguish between investing in a strong long-term theme and paying too much for it.

For long-term investors, diversification and valuation discipline matter more than trying to predict the exact market bottom.

What’s your approach now: hold QQQ, rotate towards value stocks, or keep more cash available for potential buying opportunities?

Sharing this perspective for discussion purposes only.