Love and Hate: Experts Name Stocks to Buy on a Pullback. These Aren't Chipmakers
Analysts advise investors to take a closer look at Dell, cloud giants, and cybersecurity companies, and to hold off on buying shares of chipmakers
Wall Street is looking for bargains in tech stocks, but isn't buying everything in sight / Photo: X/NYSE
Over the past week, investors have become more cautious about fast-growing tech stocks: they are assessing the growth prospects of major AI companies and how the Fed’s next move will affect businesses that rely on external financing, according to MarketWatch.
“Investors still both love and hate the tech sector,” Kit Lerner, chief investment officer at Truist Bank, told the publication. According to his calculations, over the current market upcycle, the IT sector has risen in price by approximately 240%, but has seen its value drop by 10% or more on five separate occasions.
Pulling out of the technology sector right now could prove costly, especially since, following the decline in valuations, its stocks can be purchased at a discount, according to MarketWatch. But analysts warn against buying them indiscriminately.
Michael Monaghan, portfolio manager at Founders ETFs , recommends taking a closer look at Dell’s stock. Since the start of the week, Dell’s stock has fallen by nearly 20%. “This company absolutely dominates the market for on-premises AI servers, so for anyone investing for the long term, we advise that days like this present an incredible buying opportunity,” says Monaghan. Among other investment ideas, he highlighted shares of cybersecurity firms CrowdStrike and Zscaler. Monaghan still holds shares in major AI companies, including Nvidia and Meta, but his portfolio is “a bit more balanced than, say, the Nasdaq-100, which has a very heavy weighting in memory manufacturers and other more volatile segments.” In his view, the sell-off was triggered not by problems in the tech sector but by macroeconomic factors: he attributes the market volatility to the escalation of the conflict in the Middle East.
Kit Lerner, Chief Investment Officer at Truist Bank , is not yet buying the now-cheaper shares of semiconductor companies, even though the Philadelphia Semiconductor Index has fallen to near its September lows. “We’re getting close to a buying opportunity, but for now we want to see at least some stabilization in prices,” Lerner explains. He advises holding onto shares of the largest tech companies, such as the “Magnificent Seven”: high interest rates will affect them relatively little. The AI boom has been driving the S&P 500’s growth since October 2022, and Lerner expects the rally to continue into its fifth year. The current decline in tech stocks, he says, may even be a healthy sign: sell-offs usually end only after market leaders have also fallen in price.
Evercore ISI analyst Kirk Mathern, in turn, called Microsoft a “stock for all occasions.” While investors are closely scrutinizing the returns from AI in the rest of the tech sector, “it may be worth taking a closer look at companies with predictable revenue, strong customer relationships, and steady cash flow,” he wrote.
Is the sale winding down?
In Europe on October 16, concerns over AI spending amid high interest rates eased, and the technology sector returned to positive territory after the previous day’s losses, according to Trading Economics. The Euro Stoxx 50, the eurozone’s blue-chip index, rose 0.6% during the trading session.
In U.S. pre-market trading as of 6:00 a.m. New York time (ET), electric vehicle manufacturer Tesla (+4.8%) saw the biggest gain among Nasdaq-100 companies, according to data from Investing.com. Last night, Elon Musk’s company unveiled the Roadster, a supercar that can fly. Next in line are energy company Xcel Energy (+4%), aerospace equipment manufacturer Honeywell Aerospace (+2.8%), another of Musk’s companies—SpaceX (+2.3%)—and discount retailer Ross Stores (+2.1%).
Cloud provider CoreWeave (−4%) saw the biggest decline in U.S. pre-market trading; its shares had initially plummeted the previous day due to debt concerns but closed higher. Also in the red were Bitcoin holder Strategy (−3.2%), streaming service Netflix (−2.5%), which replaced its chief content officer, data center operator Nebius (−1.6%), and memory chip manufacturer Micron (−1.5%).
This article was AI-translated and verified by a human editor
