Shrewd investors will use the tech sell-off as a buying opportunity as Wall Street’s tech-heavy Nasdaq Composite Index fell into correction territory, affirms the CEO of one of the world’s largest independent financial advisory and asset management organisations.
The analysis from Nigel Green of deVere Group comes as the Nasdaq, alongside the other main US and global indexes, comes under pressure from disappointing third-quarter results from Big Tech companies, high Treasury yields, higher-for-longer interest rates, and recession fears.
A correction happens when an index falls more than 10%, but less than 20%, from its most recent closing high.
He notes: “This dramatic sell-off is largely focused on the Nasdaq and tech stocks, which investors feel would be hit hardest by spiking interest rates.
“The Nasdaq, currently down more than 12% from its 2023 high, meaning it’s firmly in correction territory, has also been impacted by disappointing earnings recently out from the Big Tech titans.”
Last week, Meta slid 3.7% on Thursday after the Facebook parent company reported that advertising revenue had been weak.
Google-parent Alphabet also slid, falling by 9.5%, after the company fell short in its cloud business. It’s the largest decline for the stock since March 2020. Shares fell another 2.7% on Thursday morning.
Meanwhile, Apple fell by 2.5%. Amazon, despite reporting strong results, was down 1.5%.
The tech sell-off is spooking some, while some “shrewd investors will be actively using this as an important buying opportunity” for three main reasons.
“First, the AI Race is intensifying, as firms are racing to lead in the development, deployment, and utilisation of artificial intelligence technologies.
“It is going to reshape whole industries, create new ones, and fuel innovation beyond what we can currently imagine.
“All this AI needs enormous amounts of computing power, which is a path that leads companies directly to the likes of Microsoft, Google and Amazon,” says Nigel Green.
“Second, tech companies are known for their ability to pivot and adapt to changing market conditions. They’re well-equipped to weather the storm of rising interest rates and adjust their strategies to maintain profitability and relevance.
“Third, the market fears are presenting opportunities to purchase high-quality tech companies at a lower cost, allowing investors to potentially benefit from capital appreciation when the market rebounds.”
As ever, a well-balanced investment portfolio should be diversified across various asset classes, including tech stocks. Diversification helps spread risk and can provide a buffer against the impact of sell-offs in specific sectors.
The deVere CEO concludes: “Like those which have gone before it, this tech sell-off will provide an opportunity for investors to selectively acquire tech stocks with solid fundamentals and growth potential.”