A basket of unprofitable technology companies tracked by Goldman Sachs surged 27% in May, handily beating the Nasdaq 100. The kind of stocks that don’t make money are, once again, making people money.
The rally marks a sharp reversal for the basket, which tracks high-growth tech names with negative earnings. It had fallen roughly 33% between February and April before snapping back with force. Year-to-date, the basket has reportedly gained approximately 57%, a figure that says less about fundamental improvement and more about the market’s mood swings.
From freefall to frenzy
Here’s the thing about unprofitable tech stocks: they act like a barometer for risk appetite. When investors feel adventurous, these names get bid up aggressively. When fear creeps in, they’re the first to get dumped. The February-to-April drawdown of roughly 33% was a textbook example of the latter. The May rebound is a textbook example of the former.
The catalyst driving this particular round of speculative enthusiasm appears to be artificial intelligence. The AI narrative has been fueling risk-on behavior across equity markets, and it’s clearly pulling capital toward companies that promise future growth at the expense of present profitability.
