In a note released on Thursday, Albert Edwards, chief global strategist for Societe Generale, has once again sounded the alarm on the blistering 2024 stock rally, suggesting that the hype for tech stocks could be coming to a close. Edwards, known for his bearish outlook, has been warning of a recession and an impending stock market crash for months.

With valuations reaching levels that Edwards deems unsustainable, he believes that the tech sector has become an overstretched "timebomb." Currently, tech stocks account for 35% of the total S&P 500, the highest proportion since the early 2000s, prior to the dot-com crash that took years to recover from.

While Wall Street analysts are still projecting a forward earnings growth of approximately 30% for tech stocks, the actual earnings growth has only been around 20% yearly, creating a growing gap between expectations and reality.

This disparity has not gone unnoticed by market analysts. Earnings-per-share upgrades for the Nasdaq 100 have sharply declined, while upgrades for the S&P 500 and Russell 2000 are on the rise, indicating a potential correction in the tech sector.

Furthermore, the forward price-to-earnings ratio for the tech sector is currently at about 32 times forward earnings estimates, considerably higher than the S&P 500's ratio of just above 20. This suggests a stretched valuation for the tech sector and raises concerns of a looming "IT valuation timebomb," according to Edwards.

Edwards draws parallels between the current enthusiasm for tech stocks and the overinvestment in cabling by the Telecoms industry in the late 1990s, which eventually led to a collapse. He warns that a decline in EPS (earnings per share) optimism could be the trigger to burst the tech bubble.

While most forecasters are not predicting a severe stock market crash, concerns about the tech sector being overvalued and heading for a correction have been voiced on Wall Street. Morgan Stanley's chief stock strategist also anticipates a potential 10% stock pullback later this year, citing weakening corporate earnings as a possible cause.

As the stock market continues to flash warning signs, investors and analysts remain cautious about the future of tech stocks, bracing themselves for a potential downturn in the sector.

Disclaimer: This article is based on information available in the provided text and does not constitute financial advice. Readers should exercise their own discretion and consult with a qualified professional before making any investment decisions.