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Is the Tech Rally Over?

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FAANG stocks have fallen in September

The amazing bull run in tech stocks may be showing signs of slowing down. Facebook (FB) stock has fallen 4% since COO Sheryl Sandberg’s recent testimony about Russian interference in the 2016 US presidential election. The stock has fallen nearly 27% since it reported its results two months ago.

Amazon (AMZN) stock seems to be hesitating since it became the second public company to reach a valuation of $1 trillion. The stock is down 6% since it breached the milestone. Meanwhile, Alphabet stock is down nearly 8% so far in September.

Other FAANG stocks have also been trending lower. The tech-rich NASDAQ Composite Index (QQQ) has fallen more than 2% in September, while the broader S&P 500 Index is trading flat for the month.

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Tech stocks face a couple of short-term headwinds

One of the biggest concerns for the US tech sector right now is the escalating trade war between the United States and China. Companies such as Facebook, Twitter (TWTR), and Alphabet’s (GOOGL) Google are likely to face more regulatory scrutiny over user privacy.

While the bull market may not be over yet, it’s time to get selective, as the valuations of some stocks have run up, while competition is heating up in sectors such as video streaming. It could be time to consider smaller tech companies with exposure to rapidly growing sectors such as cloud computing.

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