The bubble stocks are mimicking the ARK Innovation ETF down 11% this year and indicated down again today hitting critical support levels. Bubble stocks have the ultimate duration profile (ultra-long) as their valuations are driven by cash flows far into the future, and since they are mainly equity financed the cost of capital (the discount rate on future cash flows) is driven by the cost of equity component. But with high valuations the implied equity risk premium is low and thus the marginal change in the risk-free rate dominates the marginal change in cost of capital.
Long-term bubble stocks are a bet on exponential technologies as Ark Invest’s founder and CEO Cathie Wood would, but short-term the main risk source is investor sentiment and the risk-free rate. Investors being aggressively are betting on low inflation to set in after the current spike in the inflation rate, and thus short-term the bubble stocks will be mirror image of interest rates. The worst-performing bubble stock this year has been C3.ai hit by insider selling and investors doubting the discounted growth rate.
Saxo's Bubble Stocks equity theme basket
Kuaishou Technology | China | 213,499 | -0.85 | 16.2 | 36.8 | NA |
Sea Ltd | Singapore | 140,384 | -1.26 | 17.3 | 24.2 | NA |
Airbnb Inc | United States | 130,635 | -1.31 | 28.1 | 14.7 | NA |
NIO Inc | China | 94,795 | -1.59 | 18.0 | 54.2 | NA |
Snowflake Inc | United States | 84,570 | -0.87 | 71.5 | 34.6 | NA |
DoorDash Inc | United States | 67,743 | -0.19 | 17.6 | 32.4 | NA |
Roku Inc | United States | 59,111 | -0.26 | 23.1 | 54.6 | NA |
Bilibili Inc | China | 51,601 | -4.76 | 18.2 | 48.9 | NA |
Teladoc Health Inc | United States | 41,124 | -0.30 | 20.3 | 51.7 | 1,346.9 |
XPeng Inc | China | 37,228 | -2.41 | 15.0 | 83.6 | NA |
Affirm Holdings Inc | United States | 34,499 | -0.89 | 39.7 | 91.2 | NA |
BeiGene Ltd | China | 34,490 | -9.78 | 35.8 | 24.8 | 1,063.9 |
Unity Software Inc | United States | 34,299 | -0.35 | 32.7 | 54.2 | NA |
Plug Power Inc | United States | 32,156 | -0.18 | 68.1 | 125.0 | 1,165.1 |
Seagen Inc | United States | 31,016 | -0.11 | 15.9 | 39.0 | 301.9 |
Cloudflare Inc | United States | 28,050 | -0.08 | 46.1 | 23.6 | NA |
Splunk Inc | United States | 27,486 | -0.21 | 10.8 | 62.4 | 149.6 |
MongoDB Inc | United States | 25,201 | -0.98 | 34.1 | 38.6 | NA |
Exact Sciences Corp | United States | 24,752 | -1.14 | 13.3 | 43.4 | 1,769.1 |
GSX Techedu Inc | China | 24,455 | -3.34 | 11.8 | NA | NA |
Farfetch Ltd | United Kingdom | 23,465 | -0.66 | 10.3 | 42.8 | NA |
DraftKings Inc | United States | 23,186 | -1.16 | 26.5 | 30.2 | NA |
GDS Holdings Ltd | China | 20,998 | -0.15 | 18.6 | 47.2 | NA |
10X Genomics Inc | United States | 20,458 | -0.32 | 38.9 | 13.6 | NA |
Argenx SE | Netherlands | 19,397 | -10.72 | 105.2 | 18.5 | 1,840.4 |
Alnylam Pharmaceuticals Inc | United States | 19,214 | -4.77 | 21.0 | 30.1 | 138.8 |
Ping An Healthcare and Technology Co Ltd | China | 18,942 | -0.91 | 11.6 | 55.0 | NA |
Innovent Biologics Inc | China | 18,305 | -0.61 | 24.0 | 27.8 | NA |
Guardant Health Inc | United States | 16,826 | -1.50 | 40.5 | 23.7 | NA |
Zai Lab Ltd | China | 15,781 | -2.52 | 87.5 | 13.3 | NA |
Kingsoft Cloud Holdings Ltd | China | 15,710 | -2.56 | 9.6 | 52.0 | NA |
Yatsen Holding Ltd | China | 15,665 | -1.17 | 10.7 | 90.3 | NA |
Oak Street Health Inc | United States | 15,461 | -0.46 | 11.1 | 21.1 | NA |
C3.ai Inc | United States | 15,370 | -0.79 | 69.6 | 130.8 | NA |
Bill.com Holdings Inc | United States | 15,319 | -0.19 | 57.4 | 25.7 | NA |
Canopy Growth Corp | Canada | 15,279 | -0.90 | 24.2 | 28.5 | 1,122.7 |
Appian Corp | United States | 15,229 | -0.40 | 43.3 | 34.3 | NA |
Avalara Inc | United States | 14,770 | -0.16 | 21.3 | 56.1 | NA |
Elastic NV | United States | 14,429 | -0.44 | 20.6 | 59.7 | NA |
Cree Inc | United States | 14,240 | -0.59 | 21.3 | 22.6 | 304.9 |
Source: Bloomberg and Saxo Group