Software stocks give up even more ground

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Quick blog here to update you on some important developments in the market. On a generally bad day for stocks, shares of software and cloud companies rose.

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In numerical terms, the Nasdaq Composite declined 2.51%, per CNBC data, It’s a very bad day for a huge, important class of publicly traded assets. And then the Bessemer Cloud Index, our preferred way of tracking a more targeted basket of modern software concerns, tanked 5.45% during regular trading.

That’s a lot of values ​​removed in a single day. But since the startup-critical index recently declined after a sharp drop, it was an insult to injury. Here is the chart:

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image credit: ycharts

There are two things you need to gather from this collection of graphed data:

  1. Software stocks have given back more than all their gains since the end of 2020, and have retreated more than 30% from recent highs. This is very bad.
  2. Software stocks remain highly valued and are priced higher in early 2020 than they were in the period almost two years ago. He is very good.
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So things aren’t great for modern public software companies, but not terrible either.

The issue that Nerdshala continues to track is how quickly — if at all — the decline in startup valuation shown above begins. We are seeing some reduction in the private-public market segmentation, where IPOs and direct listings try to move companies from one edge to the other. But in terms of sheer startup fundraising speed, you might not know that revenue multipliers are taking a huge bite out of the public markets. For most startups, it’s still prime day.

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