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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.
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The comments from Nigel Green, the CEO of deVere Group, one of the world’s largest independent financial advisory and asset management organizations, 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.
Nigel 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.
Magnificent Seven propelling market with ambitious AI initiative
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 the CEO of deVere Group.
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.”
He continues: “Investors need to recognize 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 personalized marketing and smart cities, AI is set to revolutionize the way we live and work.
Broader market rotating from high-flying tech stocks
“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 behavior 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 Nigel Green.
He concludes: “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.
AI-focused companies will drive future growth
“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.”
