By info@ico28.com 
The market turbulence, which saw major US stock indices experience their worst day in over 18 months on Wednesday, is creating a unique buying opportunity for savvy investors, particularly in the technology and artificial intelligence (AI) sectors.
The comments from Nigel Green, the CEO of deVere Group, comes as the S&P 500 and Nasdaq Composite tumbled by 2.3% and 3.6%, respectively, with the decline driven by some of the most influential tech stocks.
He notes: “The catalysts for this market downturn were earnings reports from Tesla and Alphabet, which fell short of the lofty expectations set by analysts.”
Tesla’s stock plunged 12.3%, marking its worst performance since 2020, following disappointing profit figures. Alphabet, despite narrowly beating revenue forecasts, saw its shares drop 5% due to underwhelming advertising revenue from YouTube.
These results sparked a broader sell-off in the tech sector, including heavyweights like Nvidia, Microsoft, Apple, and Meta.
Green says: “Yet, it’s essential to understand the context behind these numbers. The technology sector, particularly companies investing heavily in AI, has been the primary driver of market gains this year.
“The so-called Magnificent Seven, comprising Nvidia, Microsoft, Apple, Tesla, Alphabet, Meta, and Amazon, have propelled the market with their ambitious AI initiatives. These companies are not just dabbling in AI; they are making significant, long-term investments that will shape the future of technology.”
Nvidia, for example, dropped 6.8% on Wednesday, yet it remains a cornerstone of the AI revolution. As a leading provider of AI hardware and software, Nvidia’s products are integral to the development and deployment of AI technologies across various industries.
“The recent dip in its stock price, therefore, should be seen as a temporary setback rather than a reflection of its long-term potential,” observes Green.
The same goes for Microsoft, Apple, and Meta, which saw their stocks fall by 3.6%, 2.9%, and 5.6%, respectively. These companies are at the forefront of integrating AI into their core products and services, from Cloud computing and personal devices to social media platforms.
“Their substantial investments in AI research and development underscore their commitment to leading the next wave of tech innovation.
“Investors need to recognise that the current market volatility is partly due to profit-taking.
“After a significant run-up in stock prices driven by AI enthusiasm, it is natural for some investors to lock in gains, especially when earnings do not exceed expectations by a wide margin.
“However, this profit-taking phase is likely to be short-lived. The fundamental drivers of growth for these tech giants remain intact.”
The ongoing investments in AI are not just about incremental improvements but about transforming entire industries. From autonomous vehicles and healthcare diagnostics to personalised marketing and smart cities, AI is set to revolutionise the way we live and work.
“Companies that are leading this charge are positioning themselves for substantial growth in the coming years.”
Also, the broader market rotation away from high-flying tech stocks to more traditional sectors is a typical market behaviour in response to shifts in economic conditions. This rotation does not diminish the value of the tech and AI sectors but rather highlights the cyclical nature of markets.
“Long-term investors understand that periods of volatility are opportunities to accumulate shares of fundamentally strong companies at attractive prices,” explains Green.
“The recent sell-off in tech and AI stocks, driven by earnings reports that fell short of sky-high expectations, presents a compelling buying opportunity.
“The Magnificent Seven and other AI-focused companies are making strategic investments that will drive future growth.
“For many savvy investors with a long-term perspective, this will be the time to build or increase positions in these market leaders.
“The short-term volatility is being seen as a chance to buy into the next wave of tech innovation at a discount, setting the stage for significant future gains.”
source:https://www.electronicspecifier.com/products/artificial-intelligence/tech-and-ai-stocks-tumble-how-why-and-what-s-next
FAQ
- Why do tech and AI stocks sometimes drop in value?
– Tech and AI stocks can drop due to various factors, including broader market trends, changes in investor sentiment, regulatory concerns, earnings reports that fall short of expectations, or macroeconomic factors like interest rate changes and economic slowdowns.
- What are some specific reasons tech stocks might decline?
– Specific reasons might include disappointing financial results, increased competition, technological obsolescence, cybersecurity issues, or negative news about tech companies or their products.
- How do interest rate changes affect tech and AI stocks?
– Higher interest rates can lead to higher borrowing costs for companies, which can impact their profitability and growth potential. Tech companies, often with high growth expectations and significant investments in research and development, may be particularly sensitive to such changes.
- How does regulatory scrutiny impact AI stocks?
– Increased regulatory scrutiny on AI technologies, such as concerns about privacy, ethics, or data security, can lead to additional compliance costs or operational restrictions, impacting the stock prices of companies in the AI sector.
- What impact do economic downturns have on tech stocks?
– Economic downturns can lead to reduced consumer spending and lower business investments in technology, which can negatively affect tech companies’ revenues and earnings, contributing to a decline in stock prices.
- How do geopolitical events affect tech and AI stocks?
– Geopolitical events, such as trade tensions, sanctions, or conflicts, can disrupt supply chains, affect international sales, or lead to increased operational costs, impacting the financial performance and stock prices of tech and AI companies.
- Are tech and AI stocks a good long-term investment despite short-term declines?
– While short-term declines can be concerning, many investors believe that tech and AI stocks have strong long-term growth potential due to ongoing technological advancements and increasing adoption. However, it’s important to conduct thorough research and consider individual investment goals and risk tolerance.