What happened
The stocks of Zoom Video Communications (ZM 0.05%), Pinterest (PINS -0.52%), and Advanced Micro Devices (AMD -0.35%) all fell during morning trading today, as investors continue to dump technology stocks following yesterday's news that Pfizer's vaccine candidate is more than 90% effective.
Shares of Zoom were down 5.5%, Pinterest's stock tumbled 3.8%, and AMD's stock slid 5.4% on the news.
So what
Pfizer released new information about its potential vaccine candidate yesterday that sent shockwaves across the stock market. Some stocks jumped on the positive news, while others fell sharply. Tech stocks, in general, have reacted negatively to the news because they've been somewhat of an investing haven this year.
Image source: Getty Images.
When lockdowns began earlier this year, investors flocked to technology companies that they believed could continue growing during the pandemic. Zoom Video's stock skyrocketed as demand for video calls between friends, family, and coworkers jumped.
Similarly, Pinterest's stock has benefited as more people have spent more time online at home, tapping into Pinterest's unique position of being a social platform and source for home decor ideas. Likewise, AMD's stock has surged as the chipmaker has benefited from an increase in computer and gaming sales during social distancing and lockdowns.
In the most recent quarter, AMD's sales spiked 56%, Pinterest's jumped by 58% year over year, and Zoom Video's skyrocketed 355%. Even with today's share price decline, Zoom stock is still up 477%, AMD's stock has gained 72%, and Pinterest's stock is up 197% year to date.
But some investors are worried that Pfizer's potential vaccine could bring the U.S. back to normal soon, which could curb some of the growth these tech stocks have enjoyed over the past few quarters.
Pfizer is asking the U.S. Food and Drug Administration for Emergency Use Authorization for the vaccine later this month and said that it could produce up to 1.3 billion doses in 2021, with 50 million doses potentially available by the end of this year.
Now what
It appears that investors are overreacting to this preliminary vaccine news. For starters, Pfizer's potential vaccine hasn't yet been approved, nor have any plans been put into place to distribute it. Even if it gets approval and Pfizer is able to quickly produce the vaccine and works with the U.S. government to distribute doses, it will likely take many months to get the vaccine to the general population.
Additionally, investors should remember that buying and selling stocks on daily news isn't the best way to build wealth. These companies have certainly experienced growth during the pandemic, but it's a bit shortsighted to sell them now as their businesses continue to grow. Dumping the stocks now could mean investors are missing out on future returns that these companies could generate.
It's likely that over the next few months investors will learn more about this potential coronavirus vaccine, but they'd be wise to steer clear of knee-jerk reactions to news and instead buy stocks that they believe they can hold onto for several years.
