(Bloomberg.) — This year’s thumping of global technology stocks may not be over.

That’s the message from many strategists and fund managers, who expect this year’s rout to deepen in the near term as the Federal Reserve aggressively tightens monetary policy to fight inflation, raising the specter of a recession. 

Analysts still predict that tech company earnings will grow even if there is a possible economic recession. Investors are overweight the sector in their portfolios and expect to profit by buying when prices dip, according to Bank of America Corp.’s quantitative strategists. Until that optimism fades, tech stocks won’t find a bottom, the firm says.

Last week’s swift rebound isn’t convincing the skeptics. After seven consecutive weeks of losses, the gain was 7.2%. 

“While the rebound feels good it is not unusual to have bear market rallies,” said Peter Garnry, head of equity strategy at Saxo Bank. “Investors should not forget that the underlying commodity and supply chain dynamics will continue to underpin pressures on inflation and interest rates.” 

Fears of higher interest rates limiting earnings growth have led to a selloff in global stock markets. Tech-heavy Nasdaq 100 lost $4.3 trillion since its November peak and entered a bear market. The record has seen Alphabet, Microsoft and Amazon slumping 20% or more. 

“People used to buy the dip, but the weakness has gotten to the point where people are wondering whether tech should be avoided altogether,” said Robert Stimpson, co-chief investment officer at Oak Associates, which manages about $2 billion. 

Read more: Goldman Says Hedge Funds’ Rush to Dump Growth Wasn’t Fast Enough

Some bargain-hunters are encouraged by lower valuations. Nasdaq 100 trades at 21 times expected profits for the next twelve months. This is down about one third of its 2020 peak, and well below its 5-year average of 23. Alphabet is at 17 – down 40% from its peak.

There’s “exceptional” long-term opportunity in tech stocks given the decline in multiples over the past six months,  said Katie Koch, chief investment officer for public markets equity at Goldman Sachs Asset Management, said in an interview with Bloomberg TV last week. 

The average return potential of stocks on Nasdaq 100 dropped to 28%, from over 40% earlier in the month. This is a sign that sentiment has changed as analysts have lowered their price targets for individual companies by 12 months.

After Meltdown, Tech-Bottom Signals Have Yet to Scream ‘Buy Now’

Garnry recommends examining the collapses of the 1970s as well as the dotcom bubble to assess the present environment. 

“These drawdowns had multiple rebounds, periods of relief, before going lower again, so today’s investors must be extremely careful of not being fooled by a short-term rebound,” said.

Tech Chart for the Day

The Chip stock market just experienced a stunning run. Last week’s 8.1% increase in the Philadelphia Stock Exchange Semiconductor Index was enough to snap two weeks of losses and record its largest gain in over two months. This rebound was driven by the rally in markets and strong results from companies such as Marvell Technology Inc (NASDAQ): 

Top Tech Stories

• Stocks of China listed in the US, such as those from e-commerce giants Alibaba (NYSE:)  jumped, putting them on track to wipe out their monthly losses. Investors felt reassured by the ease in which lockdown measures were lifted in major cities, and positive economic data.
• Tesla (NASDAQ;) and Volkswagen OTC: plan to isolate workers from their Shanghai factories in closed loop management systems, according to people who are familiar with it. However, authorities still allow residents to roam freely within the city due to falling Covid-19 caseloads
• Telecom Italia (BIT:) is seeking an enterprise value of about 20 billion euros ($21.5 billion) for the landline network it plans to sell to Italy’s state lender and a group of international funds, according to people with knowledge of the matter
• A lobby group including Apple Inc (NASDAQ:) and other technology giants operating in India called out the country’s authorities for misunderstanding how patent fees work, following local officials’ dispute with Xiaomi (OTC:) Corp.
• Tiger Global Management has further reduced its holding in Just Eat Takeaway (AS:) after a slump of more than 70% in the food-delivery service’s share price

©2022 Bloomberg L.P.