Tech stocks have come roaring back to start 2023. And in many cases, that is for good reason. The tech industry saw shares plunge in 2022, and many good companies got thrown out with the proverbial bathwater.

That said, not everything in the tech sector is set for a significant recovery, at least not immediately. Layoffs have become the order of the day across the industry, leading to sustained pressure on revenue growth for the time being. Gluts have emerged in fields such as semiconductors in the last couple of years as massive surges in supply have outpaced waning demand.

In addition to industry-specific concerns, tech stocks face headwinds from rising interest rates and a Federal Reserve that hasn’t finished its fight against inflation. As such, this seems like a good time to lock in gains on tech stocks that have rallied sharply to start 2023. In particular, these three tech stocks look vulnerable, and I think could see severe downside in the days and weeks ahead.

Nvidia (NVDA)

Nvidia (NASDAQ:NVDA) is a classic example of a great company selling at a price that’s less-than-great. It’s no secret that Nvidia has excellent technological chops and a forward-thinking management team. The firm has made great strides in its core graphics card business and in advancing and pioneering fields such as artificial intelligence.

And yet, at too high a price, even a great company can be a bad investment. NVDA stock has, incredibly enough, already rallied 55% year-to-date. That’s a wild move for a company with a market capitalization exceeding half a trillion dollars.

Nvidia shares are currently trading for around 68-times forward earnings at its elevated valuation. And that comes even as demand for semiconductors has started to roll over. PC and tablet sales are falling. Gaming card demand is down, and the cryptocurrency mining market has dried up as a source of direction for Nvidia as well.

Nvidia will be alright in the long-run. The company’s underlying fundamentals are fine. That said, Nvidia is likely to face a challenging 2023 as semiconductors work through a significant supply glut. Meanwhile, Nvidia’s share price has run far ahead of the company’s operational progress.

Affirm Holdings (AFRM)

Shares of buy-now-pay-later company Affirm Holdings (NASDAQ:AFRM) got off to a hot start in 2023. Shares rallied from $9 at the beginning of the year to as high as $21 earlier in February. However, the run appears to be over.

Affirm shares have slipped in a big way over the past week, and things went from bad to worse following the company’s latest earnings report. In this report, the company’s results came up way short of expectations. The company slashed guidance, announced layoffs to 19% of its workforce, and laid out other cost-saving measures, such as shrinking its office space.

That said, it might not be enough. The company generated $400 million in revenues last quarter. Incredibly, it piled up a $360 million operating loss in the course of making that $400 million in sales. By lending company standards, this is terrible performance, losing almost a whole dollar for every dollar of revenue generated.

And it gets worse. Affirm’s operating loss grew much larger year-over-year. Even with the enormous layoffs, the company only anticipates saving $20 million per quarter from its cost reduction measures. That will hardly make a dent, given that it is losing more than $300 million per quarter while doing business today.

Additionally, I’d note that the consumer lending market hasn’t even really stumbled that much yet. If and when consumer loan losses mount, Affirm’s already uncertain situation may worsen. Long story short, Affirm’s financial outlook is shaky at best, and it seems likely that AFRM stock will sink to the single digits soon.

Bigbear.ai Holdings (BBAI)

Bigbear.ai Holdings (NYSE:BBAI) stock has woken up from its hibernation. The company initially looked like another failed SPAC deal, with shares falling from $10 to as low as 58 cents. However, in 2023, BBAI stock is up a startling 645% year-to-date, with shares advancing from penny stock territory to more than $5/share today.

It’s not hard to see why traders have liked BBAI stock. It’s right there in the ticker symbol. Since the ChatGPT artificial intelligence “AI” application took off in popularity, folks have been rushing to invest in any company exposed to the AI trend.

Unfortunately, Bigbear.ai doesn’t seem like one of the better ways to ride this trend. Bigbear is seeking to optimize operations in various industries through sophisticated data analysis.

However, it hasn’t yet reached broad adoption. In its 2022 prospectus, the company noted that just two customers made up 32% of its total revenues, and that the company has supported these customers for many years. It also disclosed that the U.S. Government is a significant customer, which was re-emphasized with additional Air Force contracts in January.

There’s nothing wrong with the defense sector or selling contracting services to the government. It’s quite a good business.

But it’s far removed from a consumer-facing product like ChatGPT. When people think of excellent AI applications, they’re probably not thinking of slower-moving defense projects. Bigbear.ai has historically struggled to reach profitability from its operations, and the current hype cycle around consumer AI products is unlikely to move the needle for Bigbear.Ai’s business. The company may eventually succeed, but the stock’s recent run seems dramatically overblown.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.