Big Tech Stocks Take a Beating on Monday. What to Know Before Buying Them
The sharp sell-off in the 2024 winners of tech has investors wondering whether it’s safe to buy these beaten-up stocks. Shares linked to popular artificial intelligence fell sharply on Monday after Friday’s weak July jobs report raised concerns that the Federal Reserve is lagging in cutting interest rates and the U.S. economy is headed toward recession. Tech stocks took the brunt of those losses as investors went into risk-off mode and doubts grew about how soon these megacaps will start making money on their massive AI investments. At one point during Monday’s sell-off, the “Big Seven” stocks collectively lost nearly $1 trillion in value, before recovering some of those losses. The Nasdaq’s performance on the mountain .IXIC 5D over the past five trading days has some investors wondering if the AI trade is starting to reverse, and questioning whether the sell-off is a buying opportunity or a sign of a broader spread to come. Watch for pullbacks “It’s painful, but necessary,” said Jamie Meyers, senior analyst at Laffer Tengler Investments. “We believe we’re in a secular bull market, and these bull markets can last a long time when they get corrected. We’re a little late for one like that.” To be sure, some investors on Wall Street are hitting the brakes after Monday’s sell-off, warning others to hold off on buying on dips. Paul Meeks of Harvest Portfolio Management recommends waiting until the end of the reporting season to buy stocks. He told CNBC’s “Money Movers” on Monday that he favors these stocks “fundamentally” but needs to see signs of stabilization for a few sessions. “We don’t think it’s a rush to jump in with both feet,” Laffer Tengler’s Meyers added. He’s preparing for further declines, adding that the firm has started cutting overweight names that were sold off in Monday’s session about a month ago. They include Broadcom, Microsoft and Tesla. Many investors see the sell-off as a necessary retracement in a seemingly endless uptrend in the market. “When it feels absolutely inevitable, that’s when you need to start asking questions. That’s when there are cracks in the system,” Kayne Anderson Rudnick chief market strategist Julie Biel said Monday evening in a CNBC special report. “When the consensus is completely aligned, that’s when you really need to worry.” Looking for dips Adam Sarhan, CEO of 50 Park Investments, sees the sell-off as an opportunity for investors to get into AI stocks, noting that this is the third time since October 2022 that the Nasdaq 100 has come close to its 200-day moving average — a key momentum indicator tracked by Wall Street. “The Nasdaq 100 is oversold,” he said. “It’s been down for five weeks in a row, so in terms of probability, this gives long-term investors a good risk-reward entry point.” NVDA 1M Nvidia shares over the past month The index has fallen more than 10% over the past month and ended Monday down more than 13% from its record high. AI darling Nvidia settled about 26% below its June closing high that day, while the S&P 500 ended the session about 8% below its record close the previous month. Market days like Monday present opportunities for investors who have complained about missing out on AI trading, added Jay Woods, chief global strategist at Freedom Capital Markets. Like many investors, he also sees Monday’s pullback as a minor blip in the record-breaking run-up in AI trading. “Investors who have been waiting for a pullback and believe the AI story is in its early stages—this is an opportunity that they may look back on in a few weeks and regret,” he said.
