‘Hold your ground’: Wall Street strategists say tech stock sell-off is a short-term blip as earnings bull case remains intact

Tech stocks experienced turbulence this past week arsenic investors rotated retired of this year’s AI highfliers, unwound expectations for a December complaint cut, and reassessed the outlook for the US system aft the longest authorities shutdown successful past ended.

But contempt the crisp pullback, the steepest successful much than a month, Wall Street strategists accidental the determination looks much similar profit-taking and shutdown-induced volatility than a existent interruption successful the underlying AI oregon net story.

Jeff Krumpelman, main concern strategist and caput of equities astatine Mariner Wealth Advisors, told Yahoo Finance that semipermanent AI investors shouldn’t beryllium spooked.

“We're benignant of successful a 'hold your ground' camp," helium said, explaining his squad built sizable positions successful AI stocks during the 2022 downturn, erstwhile names similar Nvidia (NVDA) were down 70% to 80%, but has since trimmed them to debar letting those positions go excessively large.

The strategist emphasized that early-stage AI adoption remains a almighty multiyear theme, and that existent volatility should not beryllium confused with thing resembling the dot-com roar and bust.

“This is real,” helium said. "We're aboriginal innings present connected AI and it's real. This is not 2000.”

Krumpelmann added that the pullback is besides revealing opportunities extracurricular the megacap leaders. Software names that person lagged this year’s AI hardware roar present look progressively attractive.

“You've got names similar ServiceNow ... down 20% this year. They've ne'er been arsenic inexpensive successful rather immoderate time,” helium said, adding that the steadfast sees “many opportunities extracurricular of these Mag Seven stocks wrong cybersecurity” arsenic well.

While AI remains the market’s astir almighty semipermanent driver, the short-term dynamics down this week’s sell-off are much mechanical than fundamental, according to Alex Morris, CEO and main concern serviceman astatine F/m Investments.

“I deliberation it's a elemental mathematics equation,” helium told Yahoo Finance. “You've got this truly heavy attraction successful AI names. And each of a sudden, erstwhile they commencement to falter, the average, fixed however overweight [the index] is, volition conscionable people autumn much than you mightiness expect."

Morris stressed the driblet isn’t wholly astir AI momentum fading either, pointing to profit-taking and positioning up of adjacent quarter’s results arsenic cardinal drivers, peculiarly with expectations inactive sky-high.

“For arsenic overmuch arsenic net are beardown and they look to enactment strong, expectations are high," helium said. “Plus, there's the benignant of knock-on effect of erstwhile implicit a 3rd of the scale has a small spot of a sneeze, the remainder of the scale surely catches cold.”