On Monday, NVIDIA NVDA shares fell more than 6%, contributing to a considerable valuation wipeout of more than $650 billion for the “Magnificent Seven” stocks during the market plunge. This iconic group of seven stocks has collectively lost about $1.3 trillion in market cap over the past three trading sessions.
There were some company-specific news that impacted the tech world. A judge ruled that Google’s search and ad businesses violated antitrust laws, contributing to a decline in its share price. Apple AAPL declined more than 4% after Berkshire Hathaway (BRK-B) disclosed that it had reduced its stake in the iPhone maker by half (read: ETFs in Focus as Buffett Cuts Apple Stake by Nearly 50%).
NVIDIA plunged as much as 13% at market open. Analysts are worried about the delay of NVIDIA’s next-generation AI chips by three months, which could affect its major customers, including Microsoft, Alphabet and Meta. The semiconductor sector has been hit hard, with Intel INTC shares plummeting massively following a disappointing second-quarter earnings report.
Gil Luria from D.A. Davidson pointed out that NVIDIA’s window to capitalize on data center expansions by companies like Microsoft, Amazon, Google and Meta will close at one point in time, told Yahoo Finance Monday. No wonder, the tech-heavy Nasdaq Composite entered correction territory. Plus, the July jobs report showed slower jobs growth and a nearly three-year high unemployment rate.
Time to Buy the Tech Stock Dip?
The AI rally is still hot. In a 2024 McKinsey survey, 39% of respondents saw lower costs resulting from AI adoption in their organization, according to Forbes. This means that over the long run, the AI business may prove to be at least a volume-driven revenue engine, if not realization-driven.
Meanwhile, investments in AI are being made in full stride by big tech companies, sensing the potential. So, if you are not buying the momentum now, you may miss out on an opportunity. And by the time, you want to jump into the AI initiative, the move might already be priced in. Agreed, the current slump is worrying some investors. But these are probably healthy corrections.
Are ETFs Better Bets Than Individual Stocks?
All big techs are investing billions in AI, but not everyone is tasting the same success. Microsoft-backed OpenAI’s ChatGPT fired on all cylinders in its initial days of launch in late 2022. OpenAI has now posed its most direct challenge yet to Alphabet’s Google through the launch of a search engine that uses artificial intelligence baked in from the beginning.
However, we are yet to be sure that OpenAI will be seen as great a success in Internet search as Google. While Alphabet initially stumbled on the Gen-AI initiative, Google has made the Gemini AI free version faster with a 1.5 flash update.
Fed to Cut Rates Sooner Than Expected?
Overall, the AI rally seems to have more room for growth. Plus, the Fed might cut rates earlier than expected due to downbeat jobs reports. Tech stocks perform better in a low-rate environment. Inflation is also cooling.
Against this backdrop, you can buy tech exchange-traded funds (ETF) like Vanguard Information Technology ETF VGT, Technology Select Sector SPDR Fund XLK, VanEck Semiconductor ETF SMH and iShares U.S. Technology ETF IYW on the dip.
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Intel Corporation (INTC) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.