40% of Russell 2000 companies are unprofitable, but their stock outperforms—and ‘the bubble could continue,’ one analyst says

Core Insights - Nasdaq 100 futures remained stable as tech stocks approached record highs, with concerns about a potential bubble in the tech sector due to the performance of unprofitable small-cap tech companies [1][2] Group 1: Market Performance - Nasdaq 100 index rose 1.3% yesterday, nearing its record high, while the S&P 500 index increased by 1%, with year-to-date gains of 20% for Nasdaq and 14.5% for S&P [1] - Approximately 40% of companies in the small-cap Russell 2000 index have no earnings or negative earnings, indicating a trend where stock prices of companies with negative earnings have outperformed those with positive earnings [1][3] Group 2: Valuation Concerns - Analysts from Bank of America noted that the S&P 500 is currently "frothy to bubbly," with valuations richer than during the 2000 dotcom bust based on nine out of twenty metrics [4] - The S&P 500's market cap to GDP, price to book, price to operating cash flow, and enterprise value to sales have reached new records, surpassing metrics from March 2000 [5] Group 3: Future Outlook - The continuation of interest rate cuts by the U.S. Federal Reserve is expected to keep capital costs low, potentially fueling further capital expenditure in tech, especially in the AI sector [5]